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Case 1:10-cr-20907-PAS Document 10 Entered on FLSD Docket 02/22/2011 Page 1 of 83
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA
CASE NO. ] 0 : 2 0 9 0 7C1MJOORE UNITED STATES OF AMERICA
VS.
ALCATEL-LUCENT, S.A., f/kIa "ALCATEL, S.A.,"
Defendant.
----------------------~/
DEFERRED PROSECUTION AGREEMENT
MAGISTRAT~ JUDGE SIMON'l"CllN
Defendant Alcatel-Lucent, S.A. ("Alcatel-Lucent"), formerly known as "Alcatel, S.A."
before its late 2006 merger with Lucent Technologies, Inc., by its undersigned attorneys, pursuant
to authority granted by Alcatel-Lucent's Board of Directors, and the United States Department of
Justice, Criminal Division, Fraud Section (the "Department"), enter into this deferred prosecution
agreement (the "Agreement"). The terms and conditions of this Agreement are as follows:
Criminal Information and Acceptance of Responsibility
1. Alcatel-Lucent acknowledges and agrees that the Department will file the attached
two-count criminal Information in the United States District Court for the Southern District of
Florida charging violations of the internal controls and books and records provisions of the
Foreign Corrupt Practices Act ("FCPA"), Title 15, United States Code, Sections 78m(b)(2)(A),
78m(b)(2)(B), 78m(b)(5), and 78ff(a). In so doing, Alcatel-Lucent: (a) knowingly waives its
right to indictment on these charges, as well as all rights to a speedy trial pursuant to the Sixth
Amendment to the United States Constitution, Title 18, United States Code, Section 3161, and
Case 1:10-cr-20907-PAS Document 10 Entered on FLSD Docket 02/22/2011 Page 2 of 83
Federal Rule of Criminal Procedure 48(b); and (b) consents to the filing of the Information, as
provided under the terms of this Agreement, in the United States District Court for the Southern
District of Florida.
2. Alcatel-Lucent admits, accepts, and acknowledges that it is responsible for the
acts of its officers, employees, agents, and those of Alcatel-Lucent's subsidiaries as charged in
the Information, and as set forth in the Statement of Facts attached hereto as Attachment A and
incorporated by reference into this Agreement, and that the allegations described in the
Information and the facts described in Attachment A are true and accurate. Should the
Department pursue the prosecution that is deferred by this Agreement, Alcatel-Lucent agrees that
it will neither contest the admissibility of nor contradict the Statement ofF acts in any such
proceeding, including any guilty plea or sentencing proceeding.
Term of the Agreement
3. This Agreement is effective for a period beginning on the date on which the
Information is filed and ending three (3) years and seven (7) calendar days from that date (the
"Term"). However, Alcatel-Lucent agrees that, in the event that the Department determines, in
its sole discretion, that Alcatel-Lucent has knowingly violated any provision of this Agreement,
an extension or extensions of the term of the Agreement may be imposed by the Department, in
its sole discretion, for up to a total additional time period of one year, without prejudice to the
Department's right to proceed as provided in Paragraphs 16-19 below. Any extension of the
Agreement extends all terms of this Agreement, including the terms of the monitorship under
Paragraphs 10-13 and Attachment D, for an equivalent period. Conversely, in the event the
Department finds, in its sole discretion, that there exists a change in circumstances sufficient to
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eliminate the need for the corporate compliance monitor described in Paragraphs 10-13 and
Attachment D, and that the other provisions of this Agreement have been satisfied, the Term of
the Agreement may be terminated early.
Relevant Considerations
4. The Department enters into this Agreement based on the individual facts and
circumstances presented by this case and Alcatel-Lucent. Among the facts considered were the
following: (a) following press reports concerning bribery by A1catel, S.A., in Costa Rica, the
company investigated and disclosed over the course of several years to the Department and the
United States Securities and Exchange Commission (the "SEC") the misconduct described in the
Information and Statement of Facts; (b) Alcatel-Lucent conducted a global internal investigation
concerning bribery and related misconduct; (c) Alcatel-Lucent reported its findings to the
Department and the SEC; (d) after limited and inadequate cooperation for a substantial period of
time, Alcatel-Lucent substantially improved its cooperation with the Department's investigation
of this matter, as well as the SEC's investigation; (e) Alcatel-Lucent undertook remedial
measures, including the implementation of an enhanced compliance program, and agreed to
undertake further remedial measures as contemplated by this Agreement; (f) on its own initiative
and at a substantial financial cost, Alcatel-Lucent determined as a matter of company policy to no
longer use third party sales and marketing agents in conducting its worldwide business; and (g)
Alcatel-Lucent agreed to continue to cooperate with the Department in any ongoing investigation
of the conduct of Alcatel-Lucent and its employees, agents, consultants, contractors,
subcontractors, and subsidiaries relating to violations of the FCP A.
S. Alcatel-Lucent shall continue to cooperate fully with the Department in any and
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all matters relating to corrupt payments and related false books and records and internal controls,
subject to applicable law and regulations, including Article 1 of French Law No. 68-678 of July
26, 1968, as amended by Law No. 80-538 ofJuly 16, 1980 (the "Blocking Statute"). At the
request of the Department, and consistent with applicable law and regulations as referenced in
the preceding sentence, Alcatel-Lucent shall also cooperate fully with such other domestic or
foreign law enforcement authorities and agencies, as well as the Multilateral Development Banks
("MDBs"), in any investigation of Alcatel-Lucent, or any of its present and former officers,
directors, employees, agents, consultants, contractors, subcontractors, and subsidiaries, or any
other party, in any and all matters relating to corrupt payments, related false books and records,
and inadequate internal controls, and in such manner as the parties may agree. Alcatel-Lucent
agrees that its cooperation shall include, but is not limited to, the following:
a. Alcatel-Lucent shall truthfully disclose all factual information not
protected by a valid claim of attorney-client privilege or work product doctrine with respect to its
activities and those of its present and former directors, employees, agents, consultants,
contractors and subcontractors, and subsidiaries concerning all matters relating to corrupt
payments and related false books and records and inadequate internal controls, about which
Alcatel-Lucent has any knowledge or about which the Department may inquire. This obligation
of truthful disclosure includes the obligation of Alcatel-Lucent to provide to the Department,
upon request, any document, record or other tangible evidence relating to such corrupt payments,
false books and records, or inadequate internal controls about which the Department may inquire
of Alcatel-Lucent.
b. Upon request of the Department, with respect to any issue relevant to its
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investigation of corrupt payments in connection with the operations of Alcatel-Lucent, related
false books and records, and inadequate internal controls, Alcatel-Lucent shall designate
knowledgeable employees, agents or attorneys to provide to the Department the information and
materials described in Paragraph 5(a) above, on behalf of Alcatel-Lucent. It is further understood
that Alcatel-Lucent must at all times provide complete, truthful, and accurate information.
c. With respect to any issue relevant to the Department's investigation of
corrupt payments, related false books and records, and inadequate internal controls in connection
with the operations of Alcatel-Lucent, or any of its present or former subsidiaries or affiliates,
Alcatel-Lucent shall use its best efforts to make available for interviews or testimony, as
requested by the Department, present or former officers, directors, employees, agents and
consultants of Alcatel-Lucent as well as the officers, directors, employees, agents and consultants
of contractors and subcontractors. This obligation includes, but is not limited to, sworn
testimony before a federal grand jury or in federal trials, as well as interviews with federal law
enforcement and regulatory authorities. Cooperation under this Paragraph shall include
identification of witnesses who, to the knowledge of Alcatel-Lucent, may have material
information regarding the matters under investigation.
d. With respect to any information, testimony, documents, records or other
tangible evidence provided to the Department pursuant to this Agreement, Alcatel-Lucent
consents to any and all disclosures, subject to applicable law and regulations, including the
Blocking Statute, to other governmental authorities, including United States authorities and those
of a foreign government, and the MDBs, of such materials as the Department, in its sole
discretion, shall deem appropriate.
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Payment of Monetarv Penalty
6. The Department and Alcatel-Lucent agree that application of the United States
Sentencing Guidelines ("USSG" or "Sentencing Guidelines") to determine the applicable fine
range yields the following analysis:
a. The 2010 USSG are applicable to this matter.
b. Base Offense. Based upon USSG § 2B 1.1, the total offense level is 36, calculated as follows:
(a)(2) Base Offense Level 6
(b )(1) Value of benefit received more than $20,000,000 +22
(b)(2) Involved 250 or more victims +6
(b)(9) Substantial part of scheme committed outside U.S. +2
TOTAL 36
c. Base Fine. Based upon USSG § 8C2.4(a)(2), the base fine is $48,100,000 (the pecuniary gain to the organization from the offense ($48,100,000) is used where such number is greater than the fme indicated in the Offense Level Fine Table ($45,500,000))
d. Culpability Score. Based upon USSG § 8C2.5, the culpability score is 9, calculated as follows:
(a) Base Culpability Score 5
(b)(1) the organization had 5,000 or more employees and an individual within high-level personnel of the organization participated in, condoned, or was willfully ignorant of the offense +5
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(g) The organization clearly demonstrated recognition and affirmative acceptance of responsibility for its criminal conduct - I
Calculation of Fine Range:
Base Fine
Multipliers
Fine Range
TOTAL 9
$48,100,000
1.8(min)/3.6(max)
$86,580,000/$173,160,000
Alcatel-Lucent agrees to pay a monetary penalty in the amount of $92,000,000, Alcatel-Lucent
and the Department agree that this fine is appropriate given the nature and extent of Alcatel-
Lucent's cooperation in this matter, penalties related to the same conduct in Costa Rica, and the
extraordinary remedial step of terminating use of third-party sales and marketing agents. This
monetary penalty is consistent with the Alternative Fines Act, Title 18, United States Code,
Section 3571, which permits an organization to be fmed not more than twice the gross gain (here,
$96,200,000). Alcatel-Lucent and the Department have agreed that Alcatel-Lucent will pay
$25,000,000 of this $92,000,000 monetary penalty to the United States Treasury within ten days
of the sentencing of the subsidiaries (the "sentencing date") reflected in Paragraph 14(c) below.
Thereafter, Alcatel-Lucent will pay an additional $25,000,000 within one year of the sentencing
date, an additional $25,000,000 within two years of the sentencing date, and an additional
$17,000,000 within three years of the sentencing date. The $92,000,000 penalty is final and shall
not be refunded. Furthermore, nothing in this Agreement shall be deemed an agreement by the
Department that $92,000,000 is the maximum penalty that maybe imposed in any future
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prosecution, and the Department is not precluded from arguing in any future prosecution that the
Court should impose a higher fme, although the Department agrees that under those
circumstances, it will recommend to the Court that any amount paid under this Agreement should
be offset against any fme the Court imposes as part of a future judgment. Finally, the parties
agree that any criminal penalties that might be imposed by the Court on Alcatel-Lucent's wholly
owned subsidiaries in connection with their guilty pleas and plea agreements entered into
simultaneously herewith will be deducted from the $92,000,000 penalty agreed to under this
Agreement. Alcatel-Lucent acknowledges that no tax deduction may be sought in connection
with the payment of any part of this $92,000,000 penalty.
Conditional Release from Criminal Liability
7. In return for the full and truthful cooperation of Alcatel-Lucent, and its
compliance with the terms and conditions of this Agreement, the Department agrees not to use
any information related to the conduct described in the attached Statement of Facts against
Alcatel-Lucent or any of its wholly owned or controlled subsidiaries in any criminal or civil case,
except: (a) in a prosecution for peljury or obstruction of justice; (b) in a prosecution for making
a false statement; ( c) in a prosecution or other proceeding relating to any crime of violence; or (d)
in a prosecution or other proceeding relating to a violation of any provision of Title 26 of the
United States Code. In addition, the Department agrees, except as provided herein, that it will
not bring any criminal case against Alcatel-Lucent or any of its wholly owned or controlled
subsidiaries related to the conduct of present and former officers, directors, employees, agents,
consultants, contractors and subcontractors, as described in the attached Statement of Facts, or
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relating to information Alcatel-Lucent disclosed to the Department prior to the date on which this
Agreement was signed.
a. This Paragraph does not provide any protection against prosecution
for any corrupt payments, false books and records, or inadequate internal controls, if any, by
Alcatel-Lucent in the future.
b. In addition, this Paragraph does not provide any protection against
prosecution of any present or former officer, director, officer, employee, shareholder, agent,
consultant, contractor, or subcontractor of Alcatel-Lucent for any violations committed by them.
Corporate Compliance Program
8. Alcatel-Lucent represents that it has implemented and will continue to
implement a compliance and ethics program designed to prevent and detect violations of the
FCPA, the anti-corruption provisions of French law, and other applicable anti-corruption laws
throughout its operations, including those of its affiliates, agents, and joint ventures, and those of
its contractors and subcontractors, with responsibilities that include interacting with foreign
officials or other high risk activities. Implementation of these policies and procedures shall not
be construed in any future enforcement proceeding as providing immunity or amnesty for any
crimes not disclosed to the Department as of the date of signing of this Agreement for which
Alcatel-Lucent would otherwise be responsible.
9. In order to address any deficiencies in its internal controls, policies, and
procedures, Alcatel-Lucent represents that it has undertaken, and will continue to undertake in
the future, in a manner consistent with all of its obligations under this Agreement, a review of its
existing internal controls, policies, and procedures regarding compliance with the FCP A, the
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anti-corruption provisions of French law, and other applicable anti-corruption laws. If necessary
and appropriate, Alcatel-Lucent will adopt new or modify existing internal controls, policies, and
procedures in order to ensure that Alcatel-Lucent maintains: (a) a system of internal accounting
controls designed to ensure the making and keeping of fair and accurate books, records, and
accounts; and (b) a rigorous anti-corruption compliance code, standards, and procedures designed
to detect and deter violations of the FCPA, the anti-corruption provisions of French law, and
other applicable anti-corruption laws. The internal controls system and compliance code,
standards, and procedures will include, but not be limited to, the minimum elements set forth in
Attachment C, which is incorporated by reference into this Agreement.
Corporate Compliance Monitor
10. Within sixty (60) calendar days of the filing of the Agreement and the
accompanying Information, or promptly after the Department's selection pursuant to Paragraph
11 below, Alcatel-Lucent agrees to retain an independent compliance monitor who is a French
national (the "Monitor") for the term specified in Paragraph 13. The Monitor's duties and
authority, and the obligations of Alcatel-Lucent with respect to the Monitor and the Department,
are set forth in Attachment D, which is incorporated by reference into this Agreement. Within
thirty (30) calendar days after the execution of this Agreement, and after consultation with the
Department, Alcatel-Lucent will propose to the Department a pool of three qualified candidates
to serve as the Monitor. If the Department, in its sole discretion, is not satisfied with the
candidates proposed, the Department reserves the right to seek additional nominations from
Alcatel-Lucent. The Monitor candidates shall have, at a minimum, the following qualifications:
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a. demonstrated expertise with respect to the FCP A, the anti-corruption
provisions of French law, and other applicable anti-corruption laws, including experience
counseling on FCP A issues;
b. experience designing and/or reviewing corporate compliance policies,
procedures and internal controls, including FCP A and anti-corruption policies, procedures and
internal controls;
c. the ability to access and deploy resources as necessary to discharge the
Monitor's duties as described in the Agreement; and
d. sufficient independence from Alcatel-Lucent to ensure effective and
impartial performance of the Monitor's duties as described in the Agreement.
11. The Department retains the right, in its sole discretion, to choose the Monitor
from among the candidates proposed by Alcatel-Lucent, though Alcatel-Lucent may express its
preference(s) among the candidates. If the Monitor resigns or is otherwise unable to fulfill his or
her obligations as set out herein and Attachment D, Alcatel-Lucent shall within sixty (60)
calendar days recommend a pool offuree qualified Monitor candidates from which the
Department will choose a replacement.
12. Alcatel-Lucent agrees that it will not employ or be affiliated with the Monitor for
a period of not less than one year from the date on which the Monitor's term expires.
13. The Monitor's term shall be three (3) years from the date on which the Monitor is
retained by Alcatel-Lucent, subject to extension or early termination as described in Paragraph 3.
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Deferred Prosecution
14. In consideration of: (a) the past and future cooperation of Alcatel-Lucent
described in Paragraphs 4 and 5 above; (b) Alcatel-Lucent's payment of a monetary criminal
penalty of $92,000,000; (c) the guilty pleas by Alcatel-Lucent's wholly owned subsidiaries
Alcatel-Lucent France, S.A., Alcatel-Lucent Trade International, A.G., and Alcatel
Centroamerica, S.A.; and (d) Alcatel-Lucent's implementation and maintenance of remedial
measures, and independent review and audit of such measures, including the compliance code
, and review by the Monitor as described in Paragraphs 8 through 11 above, the Department agrees
that any prosecution of Alcatel-Lucent for the conduct set forth in the attached Statement of
Facts, and for the conduct that Alcatel-Lucent disclosed to the Department prior to the signing of
this Agreement, be and hereby is deferred for the Term of this Agreement.
15. The Department further agrees that if Alcatel-Lucent fully complies with all of its
obligations under this Agreement, the Department will not continue the criminal prosecution against
Alcatel-Lucent described in Paragraph 1 and, at the conclusion of the Term, this Agreement shall
expire. Within thirty (30) days of the Agreement's expiration, the Department shall seek dismissal
with prejudice of the criminal Information filed against Alcatel-Lucent described in Paragraph 1.
Breach of the Agreement
16. If, during the Term of this Agreement, the Department determines, in its sole
discretion, that Alcatel-Lucent has (a) committed any felony under federal law subsequent to the
signing of this Agreement, (b) at any time provided deliberately false, incomplete, or misleading
information, or (c) otherwise breached the Agreement, Alcatel-Lucent shall thereafter be subject
to prosecution for any federal criminal violation of which the Department has knowledge,
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including the charges in the Information attached as Exhibit 1, which may be pursued by the
Department in the U.S. District Court for the Southern District of Florida. Any such prosecution
may be premised on information provided by Alcatel-Lucent. Any such prosecution that is not
time-barred by the applicable statute oflimitations on the date of the signing of this Agreement
may be commenced against Alcatel-Lucent notwithstanding the expiration of the statute of
limitations between the signing of this Agreement and the expiration of the Term plus one year.
Thus, by signing this Agreement, Alcatel-Lucent agrees that the statute of limitations with
respect to any prosecution that is not time-barred on the date of the signing of this Agreement
. shall be tolled for the Term plus one year.
17. In the event that the Department determines that Alcatel-Lucent has breached this
Agreement, the Department agrees to provide Alcatel-Lucent with written notice of such breach
prior to instituting any prosecution resulting from such breach. Alcatel-Lucent shall, within
thirty (30) days of receipt of such notice, have the opportunity to respond to the Department in
writing to explain the nature and circumstances of such breach, as well as the actions Alcatel
Lucent has taken to address and remediate the situation, which explanation the Department shall
consider in determining whether to institute a prosecution.
18. In the event that the Department determines that Alcatel-Lucent has breached this
Agreement: (a) all statements made by or on behalf of Alcatel-Lucent to the Department or to
the Court, including the attached Statement of Facts, and any testimony given by Alcatel-Lucent
before a grand jury, a court, or any tribunal, or at any legislative hearings, whether prior or
subsequent to this Agreement, or any leads derived from such statements or testimony, shall be
admissible in evidence in any and all criminal proceedings brought by the Department against
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A1catel-Lucent; and (b) A1catel-Lucent shall not assert any claim under the United States
Constitution, Rule ll(f) of the Federal Rules of Criminal Procedure, Rule 410 of the Federal
Rules of Evidence, or any other federal rule, that statements made by or on behalf of Alcatel
Lucent prior or subsequent to this Agreement, and any leads derived therefrom, should be
suppressed. The decision whether conduct or statements of any current director or employee, or
any person acting on behalf of, or at the direction of, Alcatel-Lucent, will be imputed to A1catel
Lucent for the purpose of determining whether A1catel-Lucent has violated any provision of this
Agreement shall be in the sole discretion of the Department.
19. Alcatel-Lucent acknowledges that the Department has made no representations,
assurances, or promises concerning what sentence may be imposed by the Court if Alcatel
Lucent breaches this Agreement and this matter proceeds to judgment. A1catel-Lucent further
acknowledges that any such sentence is solely within the discretion of the Court and that nothing
in this Agreement binds or restricts the Court in the exercise of such discretion.
Sale or Merger of AIcatel-Lucent
20. A1catel-Lucent agrees that in the event it sells, merges, or transfers all or
substantially all of its business operations as they exist as of the date of this Agreement, whether
such sale is structured as a stock or asset sale, merger or transfer, it shall include in any contract
for sale, merger, or transfer a provision binding the purchaser, or any successor in interest
thereto, to the obligations described in this Agreement.
Public Statements by AIcatel-Lucent
21. Alcatel-Lucent expressly agrees that it shall not, through present or future
attorneys, officers, directors, employees, agents or any other person authorized to speak for
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Alcatel-Lucent make any public statement, in litigation or otherwise, contradicting the
acceptance of responsibility by Alcatel-Lucent set forth above or the facts described in the
attached Statement of Facts. Any such contradictory statement shall, subject to cure rights of
Alcatel-Lucent described below, constitute a breach of this Agreement and Alcatel-Lucent
thereafter shall be subject to prosecution as set forth in Paragraphs 16-19 of this Agreement. The
decision whether any public statement by any such person contradicting a fact contained in the
Statement of Facts will be imputed to Alcatel-Lucent for the purpose of determining whether
they have breached this Agreement shall be at the sole discretion of the Department. If the
Department determines that a public statement by any such person contradicts in whole or in part
a statement contained in the Statement of Facts, the Department shall so notify Alcatel-Lucent,
and Alcatel-Lucent may avoid a breach of this Agreement by publicly repudiating such
statement(s) within five (5) business days after notification. Consistent with the obligations of
Alcatel-Lucent as set forth above, Alcatel-Lucent shall be permitted to raise defenses and to
assert affirmative claims in civil and regulatory proceedings relating to the matters set forth in the
Statement of Facts. This Paragraph does not apply to any statement made by any present or
former employee of Alcatel-Lucent in the course of any criminal, regulatory, or civil case
initiated against such individual, unless such individual is speaking on behalf of Alcatel-Lucent.
22. Alcatel-Lucent agrees that if it or any of its direct or indirect affiliates or
subsidiaries issues a press release or holds any press conference in connection with this
Agreement, Alcatel-Lucent shall first consult the Department to determine (a) whether the text of
the release or proposed statements at the press conference are true and accurate with respect to
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matters between the Department and Alcatel-Lucent; and (b) whether the Department has no
objection to the release.
23. The Department agrees to bring to the attention of governmental and other
debarment authorities the facts and circumstances relating to the nature of the conduct underlying
this Agreement, including the nature and quality of Alcatel-Lucent's cooperation and
remediation. By agreeing to provide this information to debarment authorities, the Department is
not agreeing to advocate on behalf of Alcatel-Lucent, but rather is providing facts to be evaluated
, if-;
independently by the debarment authorities.
Limitations on Binding Effect of Agreement
24. This Agreement is binding on Alcatel-Lucent and the Department but specifically
does not bind any other federal agencies, or any state, local or foreign law enforcement or
regulatory agencies, or any other authorities, although the Department will bring the cooperation
of Alcatel-Lucent and its compliance with its other obligations under this Agreement, to the
attention of such agencies and authorities if requested to do so by Alcatel-Lucent.
Notice
25. Any notice to the Department under this Agreement shall be given by personal
delivery, overnight delivery by a recognized delivery service, or registered or certified mail,
addressed to the Deputy Chief - FCPA Unit, Fraud Section, Criminal Division, U.S. Department
of Justice, Fourth Floor, 1400 New York Avenue, N.W., Washington, D.C. 20005. Any notice
to Alcatel-Lucent under this Agreement shall be given by personal delivery, overnight delivery
by a recognized delivery service, or registered or certified mail, addressed to Stephen R.
Reynolds (or his successor), General Counsel, Alcatel-Lucent, 600 Mountain Avenue, Murray
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Hill, NJ 07974, and Martin J. Weinstein, Willkie Farr & Gallagher LLP, 1875 K Street, N.W.,
Washington, D.C. 20006. Notice shall be effective upon actual receipt by the Department or
Alcatel-Lucent.
Complete Agreement
26. This Agreement sets forth all the terms of the agreement between Alcatel-Lucent
and the Department. No amendments, modifications or additions to this Agreement shall be
valid unless they are in writing and signed by the Department, the attorneys for Alcatel-Lucent
and a duly authorized representative of Alcatel-Lucent
AGREED:
FOR ALCATEL-LUCENT, S.A.:
Date: 16/Z. -/ (0
Date: _--,-,i 1-",1,-,'-",.-(,-,(,,-, _
FOR THE DEPARTMENT OF JUSTICE:
Date: IJ./zQ/;O i I I
By: S~REYNOLDS General Counsel
By: ~ '----MART 1. WEINSTEIN Willkie Farr & Gallagher LLP
DENIS 1. McINERNEY Chief, Fraud Section
BY~~ CHARL~O Deputy . ef, Fraud Section
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Date: 1j1IJ.o/lD By: J ,
18
Trial Attorney, Fraud Section
United States Department of Justice Criminal Division 1400 New York Ave., N.W. Washington, D.C. 20005 (202) 353-7691
Case 1:10-cr-20907-PAS Document 10 Entered on FLSD Docket 02/22/2011 Page 19 of 83
GENERAL COUNSEL'S CERTIFICATE
I have read this Agreement and carefully reviewed every part of it with outside counsel
for Alcatel-Lucent, S.A. ("Alcatel-Lucent"). I understand the terms of this Agreement and
voluntarily agree, on behalf of Alcatel-Lucent, to each of its terms. Before signing this
Agreement, I consulted outside counsel for Alcatel-Lucent. Counsel fully advised me of the
rights of Alcatel-Lucent, of possible defenses, of the Sentencing Guidelines' provisions, and of
the consequences of entering into this Agreement.
I have carefully reviewed the terms of this Agreement with the Board of Directors of
Alcatel-Lucent. I have advised and caused outside counsel for Alcatel-Lucent to advise the
Board of Directors fully of the rights of Alcatel-Lucent, of possible defenses, of the Sentencing
Guidelines' provisions, and of the consequences of entering into the Agreement.
No promises or inducements have been made other than those contained in this
Agreement. Furthermore, no one has threatened or forced me, or to my knowledge any person
authorizing this Agreement on behalf of Alcatel-Lucent, in any way to enter into this Agreement.
I am also satisfied with outside counsel's representation in this matter. I certifY that I am General
Counsel for Alcatel-Lucent and that I have been duly authorized by Alcatel-Lucent to execute
this Agreement on behalf of Alcatel-Lucent.
Date: Ide- Die () ,2010
ALCATEL-LUCENT, SA
By:
General Counsel
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CERTIFICATE OF COUNSEL
I am counsel for Alcatel-Lucent, S.A. ("Alcatel-Lucent") in the matter covered by this
Agreement. In connection with such representation, I have examined relevant Alcatel-Lucent
documents and have discussed the terms of this Agreement with the Alcatel-Lucent Board of
Directors. Based on our review of the foregoing materials and discussions, I am of the opinion
that the representative of Alcatel-Lucent has been duly authorized to enter into this Agreement on
behalf of Alcatel-Lucent and that this Agreement has been duly and validly authorized, executed,
and delivered on behalf of Alcatel-Lucent and is a valid and binding obligation of Alcatel-
Lucent. Further, I have carefully reviewed the terms of this Agreement with the Board of
Directors and the General Counsel of Alcatel-Lucent. I have fully advised them of the rights of
Alcatel-Lucent, of possible defenses, of the Sentencing Guidelines' provisions and of the
consequences of entering into this Agreement. To my knowledge, the decision of Alcatel-Lucent
to enter into this Agreement, based on the authorization of the Board of Directors, is an informed
and voluntary one.
Date: Oc-"" ~ ~ 1", ,2010 ~T~J.VVETINSTETIN Willkie Farr & Gallagher LLP Counsel for Alcatel-Lucent, S.A.
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ATTACHMENT A
STATEMENT OF FACTS
1. The following Statement of Facts is incorporated by reference as part of the
Deferred Prosecution Agreement (the "Agreement") between the United States Department of
Justice, Criminal Division, Fraud Section (the "Department") and ALCATEL-LUCENT, SA
("ALCATEL-LUCENT"), and the parties hereby agree and stipulate that the following
information is true and accurate. ALCATEL-LUCENT admits, accepts, and acknowledges that it
is responsible for the acts of its officers, employees, agents, and those of ALCATEL-LUCENT's
subsidiaries as set forth below. Should the Department pursue the prosecution that is deferred by
this Agreement, ALCATEL-LUCENT agrees that it will neither contest the admissibility of, nor
contradict, this Statement of Facts in any such proceeding. If this matter were to proceed to trial,
the Department would prove beyond a reasonable doubt, by admissible evidence, the facts
alleged below and set forth in the criminal Information attached to this Agreement. This
evidence would establish the following:
Relevant ALCATEL-Related Corporate Entities and Employees
2. Defendant ALCATEL-LUCENT, S.A. ("ALCATEL"), was a corporation
organized under the laws of France with its principal offices in Paris, France. In late 2006, an
ALCATEL subsidiary merged with Lucent Technologies, Inc. in the United States (hereinafter
the "2006 Merger") and ALCATEL SA changed its name to ALCATEL-LUCENT, SA
ALCATEL was a worldwide provider of a wide variety of telecommunications equipment and
services and other technology products. From 2001 to 2005, ALCATEL employed between
55,000 and 100,000 employees through the Alcatel Group. The Alcatel Group operated in more
than 130 countries, directly and through certain wholly owned and indirect subsidiaries,
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including in France, the United States of America, and, as set forth more fully below, in Costa
Rica, Honduras, Malaysia, and Taiwan. The Alcatel Group maintained an office in Miami,
Florida, in the Southern District of Florida, through which ALCA TEL pursued business
throughout Central and South America. From at least 1998 until late 2006, American
Depositary Shares of ALCATEL were registered with the U.S. Securities and Exchange
Commission ("SEC") and traded on the New York Stock Exchange as American Depositary
Receipts ("ADRs''). Accordingly, ALCATEL was an "issuer" within the meaning of the FCPA,
Title 15, United States Code, Section 78dd-1.
3. Alcatel-Lucent France, S.A., which was known before the 2006 Merger as
"Alcatel CIT, S.A." (hereinafter "Alcatel CIT"), was headquartered in Velizy, France, just
outside Paris. Alcatel CIT was a wholly owned subsidiary of ALCATEL, and was incorporated
in France. Accordingly, Alcatel CIT was a "person other than an issuer or a domestic concern"
within the meaning of the FCPA, Title 15, United States Code, Section 78dd-3. In the 1990s
and continuing until at least late 2006, Alcatel CIT was a commercial arm of ALCA TEL and was
responsible for contracting with telecommunications providers, including many
telecommunications providers owned by foreign govemments, to sell ALCA TEL's
telecommunications equipment and services and other technology products. Throughout the
relevant time period, Alcatel CIT had more than 7,000 employees, and its fmancial results were
included in the consolidated financial statements that ALCATEL filed with the SEC. Alcatel
CIT and its employees had regular communications with, and Alcatel CIT employees traveled to
and met with, ALCA TEL personnel located in the office in Miami, Florida, in the Southern
District of Florida. Such communications and meetings involved, among other things,
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discussions about payments to third-party consultants, who passed on some or all of such
payments to foreign officials in exchange for obtaining or retaining business. Alcatel CIT also
maintained at least one bank account in the United States through which it paid money to third
party consultants that it knew were going to pass on some or all of that money to foreign officials
in exchange for obtaining or retaining business.
4. Alcatel-Lucent Trade International, A.G., which was known before the 2006
Merger as "Alcatel Standard, A.G." (hereinafter "Alcatel Standard"), was headquartered in
Basel, Switzerland. Alcatel Standard was a wholly owned subsidiary of ALCAfEL, and was
incorporated in Switzerland. Accordingly, Alcatel Standard was a "person other than an issuer or
a domestic concern" within the meaning of the FCPA, Title 15, United States Code, Section
78dd-3. Alcatel Standard was responsible for entering into most agreements with consultants
worldwide on behalf of ALCATEL, AlcatelCIT, and certain other subsidiaries of ALCATEL.
Throughout the relevant time period, Alcatel Standard had approximately a dozen employees,
and its financial results were included in the consolidated fmancial statements that ALCATEL
filed with the SEC. Alcatel Standard and its 'employees had regular communications, including
telephone calls, facsimiles, and email, with ALCATEL personnel located in the office in Miami,
Florida, in the Southern District of Florida. Such communications involved, among other things,
discussions about payments to third-party consultants, who passed on some or all of such
payments to foreign officials in exchange for obtaining or retaining business. Alcatel Standard
also made some payments to third-party consultants via a correspondent account in the United
States.
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5. Alcatel Centroamerica, S.A., which was known before the 2006 Merger as
"Alcatel de Costa Rica, S.A." (hereinafter "ACR"), was formed under the laws of Costa Rica and
was headquartered in San Jose, Costa Rica. ACR was a wholly owned subsidiary of ALCATEL.
Accordingly, ACR was a "person other than an issuer or a domestic concern" within the meaning
of the FCPA, Title IS, United States Code, Section 78dd-3. ACR was responsible for the
day-to-day commercial operations of ALCATEL in Costa Rica and Honduras during the relevant
time period. Throughout the relevant time period, ACR had approximately fifty employees, and
its financial results were included in the consolidated financial statements that ALCA TEL filed
with the SEC. ACR and its employees had regular communications, including telephone calls,
facsimiles, and emails, with ALCA TEL personnel located in the office in Miami, Florida, in the
Southern District of Florida. Such communications involved, among other things, discussions
about payments to third-party consultants, who passed on some or all of such payments to foreign
officials in exchange for obtaining or retaining business.
6. Alcatel Network Systems Malaysia Sdn. Bhd. ("Alcatel Malaysia") was
founded as a joint venture in 1992 in Kuala Lumpur, Malaysia. ALCATEL owned a majority
share of and exercised control over the joint venture. Alcatel Malaysia's primary function was to
provide product and sales support for ALCATEL' s business units in Malaysia during the relevant
time period. Throughout the relevant time period, Alcatel Malaysia's financial results were
included in the consolidated financial statements that ALCA TEL filed with the SEC.
7. Alcatel SEL, A.G. ("Alcatel SEL") was formed under the laws of Germany and
was headquartered in Stuttgart, Germany. A1catel SEL was an indirect subsidiary of ALCATEL.
Alcatel SEL' s Transport Automation Solutions business unit was responsible for bidding on an
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axle counting contract with the state-owned Taiwan Railway Administration in Taiwan during
the relevant time period. Throughout the relevant time period, Alcatel SEL' s fmancial results
were included in the consolidated fmancial statements that ALCATEL filed with the SEC.
8. Executive 1 was a citizen of France and served as the Chief Executive Officer of
Alcatel Standard in Basel, Switzerland. In this capacity, Executive I' s fmal approval was
necessary for the hiring of almost all third-party consultants retained by ALCA TEL and its
subsidiaries, including ensuring that appropriate due diligence was conducted prior to the hiring
of each consultant. Executive I executed the consultancy agreements with consultants
throughout the world on behalf of Alcatel Standard for the benefit of ALCATEL, Alcatel CIT,
ACR, and certain other wholly owned and indirect subsidiaries of ALCATEL and its joint
ventures. Executive I was also responsible, in part, for the training of ALCATEL's Country
Senior Officers on how to process the required paperwork for retaining and using third-party
consultants.
9. Christian Sapsizian ("Sapsizian") was a citizen of France and was a long-term
employee of ALCATEL and its wholly owned subsidiary, Alcatel CIT, eventually rising to the
level of Alcatel CIT's Director for Latin America. In this capacity, Sapsizian developed business
in Latin America on behalf of ALCATEL and its subsidiaries, including ACR, and spent part of
his time working at Alcatel CIT headquarters in France and part of his time traveling throughout
Latin America attending to ALCATEL's business in the region.
10. Edgar Valverde Acosta ("Valverde") was a citizen of Costa Rica and served as
the President of ACR and Country Senior Officer ("CSO") for Costa Rica. As the President of
ACR and CSO of Costa Rica, Valverde worked with Sapsizian. In this capacity, Valverde was
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responsible for developing business for ALCA TEL's services and equipment with Instituto
Costarricense de Electricidad, S.A, the Costa Rican state-owned telecommunications authority.
In Costa Rica, Valverde negotiated contracts with third-party consultants who worked on
ALCATEL's behalf in Costa Rica. Valverde was himself a former official at Instituto
Costarricense de Electricidad, S.A.
11. Executive 2 and Executive 3 served as Alcatel Malaysia's CSO and Chief
Financial Officer, respectively.
12. Executive 4 was a citizen of Germany and served as Alcatel SEL' s director of
international business and sales of Transport Automation Solutions. In that capacity, Executive 4
was responsible for ALCATEL's Taiwan Railway Administration contracts in Taiwan.
Relevant Entities and Foreign Officials in Costa Rica
13. Instituto Costarricense de Electricidad S.A. ("ICE") was a wholly state-owned
telecommunications authority in Costa Rica responsible for awarding and administering public
tenders for telecommunications contracts. ICE was governed by a seven-member board of
directors that evaluated and approved, on behalf of the government of Costa Rica, all bid
proposals submitted by telecommunications companies. The Board of Directors was led by an
Executive President, who was appointed by the President of Costa Rica. The other members of
the Board of Directors were appointed by the President of Costa Rica and the Costa Rican
governirig cabinet. Accordingly, officers, directors and employees ofICE were "foreign
officials" within the meaning of the FCPA, Title 15, United States Code, Section 78dd-
I (f)(1)(A).
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14. Servicios Notariales, Q.C. S.A. ("Servicios Notariales") was a purported
consulting fIrm based in Costa Rica that entered into several sham consulting agree'ments with
Alcatel Standard on behalf of Alcatel CIT to assist ALCATEL in obtaining telecommunications
contracts in Costa Rica.
15. Intelmar Costa Rica, S.A. ("Intelmar") was a consulting fIrm based in Costa
Rica that entered into numerous sham consulting agreements with Alcatel Standard on behalf of
Alcatel CIT to assist ALCATEL in obtaining telecommunications contracts in Costa Rica.
Intelmar maintained an office within ACR's office space in Costa Rica
16. ICE Officiall was a director of ICE and had a close relationship with Senior
Government Officiall, who was a high-ranking official in the Costa Rican executive branch.
ICE Official 2, ICE Official 3, ICE Official 4, ICE OfficialS, and ICE Official 6 were also
officers, directors or employees ofICE. Legislator 1 was a legislator in the Legislative
Assembly (Asamblea Legislativa), which was the unicameral legislative branch of the
Government of Costa Rica. ICE Officials 1-6, Senior Government Official 1, and Legislator 1
were "foreign officials" within the meaning of the FCPA, Title 15, United States Code, Section
78dd-l(f)(l)(A), and they were each in a signifIcant position to influence the policy decisions
made by ICE and the contracts awarded by ICE.
Relevant Entities and Foreign Officials in Honduras
17. Empresa Hondureiia de Telecomunicaciones ("Hondutel") was a wholly
state-owned telecommunications authority in Honduras, established under Honduran law, and it
was responsible for providing telecommunications services in Honduras which, until late 2002,
included evaluating and awarding telecommunications contracts on behalf of the government of
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Honduras. Several senior government officials sat on Hondutel's Board of Directors.
Hondutel's operations were overseen by another Honduran government entity, Cornisi6n
Nacional de Telecomunicaciones. Profits earned by Hondutel belonged to the government of
Honduras, though part of the profit was permitted to be used by Hondutel for its operations.
Accordingly, employees of Hondutel were "foreign officials" within the meaning of the FCP A,
Title 15, United States Code, Section 78dd-I(f)(1)(A).
18. Comisi6n Nacional de Telecomunicaciones ("Conatel") was the Honduran
government agency that regulated the telecommunications sector in Honduras. Conatel issued
licenses and concessions for fixed-line and wireless telephony, data transmission, and Internet
services. Conatel was part of the Honduran executive branch under the Secretariat of Finance.
Conatel's commissioners were appointed by the President of Honduras. Accordingly, officers,
commissioners, and employees of Conatel were "foreign officials" within the meaning of the
FCPA, Title 15, United States Code, Section 78dd-l(f)(l)(A).
19. Honduran Consultant 1 was a purported consulting firm based in Honduras that
entered into a sham consulting agreement with Alcatel Standard to assist Alcatel CIT and Alcatel
Mexico (formerly known as "Alcatel Indetel"), a wholly owned subsidiary of ALCATEL, in
obtaining telecommunications contracts in Honduras on behalf of ALCATEL.
20. Senior Government Official 2 was a high-ranking government official in the
Honduran executive branch. Hondutel Official and Conatel Official were both high-ranking
officials within Hondutel and Conatel, respectively. Senior Government Official 2, Hondutel
Official, and Conatel Official were "foreign officials" within the meaning of the FCP A, Title 15,
United States Code, Section 78dd-l(f)(l)(A), and they were each in a significant position to
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influence the policy decisions made by the Honduran government, including the awarding of
contracts by Hondutel prior to 2003.
Relevant Entities in Malaysia
21. Telekom Malaysia Berhad ("Telekom Malaysia") was a state-owned and
controlled telecommunications provider in Malaysia. Telekom Malaysia was responsible for
awarding telecommunications contracts during the relevant time period. The Malaysian Ministry
of Finance owned approximately 43% of Telekom Malaysia's shares, had veto power over all
major expenditures, and made important operational decisions. The government owned its
interest in Telekom Malaysia through the Minister of Finance, who had the statns of a "special
shareholder." Most senior Telekom Malaysia officers were political appointees, including the
Chairman and Director, the Chairman of the Board of the Tender Committee, and the Executive
Director. Accordingly, officers, directors and employees of Telekom Malaysia were "foreign
officials" within the meaning of the FCPA, Title 15, United States Code, Section 78dd-
1 (f)(I)(A).
22. Malaysian Consultant 1 was a consulting fum with operations in Asia that
entered into sham consulting agreements with Alcatel Standard to provide market strategy reports
focusing on technology.
23. Malaysian Consultant 2 was a consulting firm based in Asia that entered into a
sham consulting agreement with Alcatel Standard to provide a strategic intelligence report for
ALCATEL's Southeast Asia South Region.
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Relevant Entities and Foreign Officials in Taiwan
24. Taiwan Railway Administration ("TRA") was the wholly state-owned
authority in Taiwan responsible for managing, maintaining, and running passenger freight service
on Taiwan's railroad lines. It was responsible for awarding and administering all public tenders
in connection with Taiwan's railroad lines, including contracts to design, manufacture, and
install an axle counting system to control rail traffic. TRA was an agency of Taiwan's Ministry
of Transportation and Communications, a cabinet-level governmental body responsible for the
regulation of transportation and communications networks and operations. Accordingly, officers
and employees ofTRA were "foreigu officials" within the meaning of the FCPA, Title 15,
United States Code, Section 78dd-l(f)(I)(A).
25. Taiwan International Standard Electronics, Ltd. ("Taisel") was based in
Taiwan and was a joint venture sixty-percent owned by Alcatel Participations, a wholly owned
subsidiary of ALCATEL, and forty-percent owned by a Taiwanese corporation.
26. Taiwanese Consultant 1 was a consulting firm based in Taiwan that entered into
a consulting agreement with Alcatel Standard to assist Alcatel SEL in obtaining axle counting
contracts in Taiwan on behalf of ALCA TEL.
27. Taiwanese Consultant 2 was a consulting firm based in Taiwan which entered
into a consulting agreement with Taisel on behalf of ALCATEL to assist Alcatel SEL in
obtaining axle counting contracts in Taiwan on behalf of ALCATEL.
28. Legislator 2, Legislator 3, and Legislator 4 were all members of the Legislative
Yuan, the unicameral legislative assembly of the Republic of China, whose territory consists of
Taiwan, Penghu, Kinmen, and Matsu Islands. Legislator 2, Legislator 3, and Legislator 4 were
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"foreign officials" within the meaning of the FCPA, Title 15, United States Code, Section 78dd-
1(f)(1)(A), and they were in a significant position to influence the policy decisions made by the
Taiwan government, including the awarding of contracts.
Background Regarding ALCATEL 's Business Practices and the State Of Its Internal Controls
29. Starting in the 1990s and continuing through at least late 2006, ALCATEL
pursued many of its business opportunities around the world through the use of third-party agents
and consultants. This business model was shown to be prone to corruption, as consultants were
repeatedly used as conduits for bribe payments to foreign officials (and business executives of
private customers) to obtain or retain business in many countries. ALCATEL also suffered from
a de-centralized business structure, which permitted the different ALCA TEL employees around
the world to initially vet the third-party consultants, and then rely on Executive 1 at Alcatel
Standard to perform due diligence on them. In practice, this de-centralized structure and
approval process permitted corruption to occur, as the local employees were more interested in
obtaining business than ensuring that business was won ethically and legally. Meanwhile,
Executive 1 performed no due diligence of substance and remained, at best, deliberately ignorant
of the true purpose behind the retention of and payment to many of the third-party consultants.
30. ALCATEL's organizational structure consisted of geographic Regions (each
responsible for marketing and sales to customers within their territorial boundaries), Business
Groups (further subdivided into Business Divisions, which were responsible for product-related
activities, including the tendering process), and Units (legal entities with the ability to sign
contracts and incur financial obligations). ALCATEL's Units were structured in a matrix
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operating model that featured (a) large, autonomous legal entities with worldwide responsibility
for researching, developing, and manufacturing particular product lines, and (b) similarly
autonomous legal entities with a local presence in many countries responsible for the sale and
support of those product lines in defined geographic areas. Units were located in specific
geographical Regions and could also house specific Business Division operations.
31. ALCA TEL typically set up a subsidiary or affiliated entity, such as ACR or
Alcatel Malaysia, in a country to obtain contracts. A Country Senior Officer, or CSO, managed
the subsidiary and selected consultants to solicit business for ALCATEL from government
officials in that country. The CSO engaged a consultant by preparing a form called a Service
Agreement Request ("SAR"). The SAR identified the consultant, the project for which the
consultant was being engaged, and the terms of the engagement. The SAR required approval by
the ALCA TEL Region or Area President. The SAR was accompanied by a Consultant Profile, a
form that the consultant was supposed to complete with information concerning its ownership,
business activities, capabilities, banking arrangements, and professional references. The
completed Consultant Profile also required approval by the Area President.
32. A separate form called a Forecast of Sales Expenses ("FSE") was prepared to
document approval of the expense of using a sales and/or marketing consultant. The FSE
identified the project and the amount of the fee or commission to be paid to the consultant, but
did not call for the consultant to be identified by name or for any information concerning the
consultant's qualifications or expected activities. The FSE required the signatures of: (a) the
Area President, to indicate his approval of the selection of the consultant; (b) the President of the
Business Division responsible for the product involved in the transaction, to indicate his approval
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of the commission expense as a profit and loss charge to his Business Division; (c) the President
of the actual legal entity within ALCA TEL responsible for fulfilling the customer bid or contract,
to indicate his approval of the payment by his entity of the consultant's commission; and, finally,
(d) the Chief Executive Officer ("CEO") of Alcatel Standard, namely, Executive 1.
33. Upon execution of the FSE by the Area President, the Business Division
President, and the President of the relevant legal entity, the SAR, Consultant Profile, and FSE
were transmitted to Alcatel Standard. Alcatel Standard would then typically request a Dun &
Bradstreet report to confirm the existence and address of the consultant as stated in the
Consultant Profile. Executive 1 would then sign the FSE to confirm that all of the necessary
approvals had been obtained. Finally, Executive 1 would execute the contract with the
consultant, which at times called for the consultant to perform vaguely-described marketing
services.
34. Executive 1 made no effort, or virtually no effort, to verify the information
provided by the consultant in the Consultant Profile, apart from using Dun & Bradstreet reports
to confirm the consultant's existence and physical address. There was no requirement for the
provision of information regarding conflicts of interest or relationships with government
officials. Indeed, even where the Dun & Bradstreet report disclosed problems, inconsistencies,
or red flags, typically nothing was done. Thus, even if the consultant was a close relative of a
high-ranking foreign official, as was the case in some instances, this information was not listed
on the Consultant Profile and little or no effort was made to address such obvious conflicts and
risks. Rather, ifthe paperwork was completed, regardless of any obvious issues (such as close
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relationships with foreign officials or a clear lack of skill, experience or telecommunications·
expertise), Executive 1 authorized hiring and paying the third-party consultant.
35. In many instances, Alcatel Standard would contract with the third-party
consultant and then Alcatel CIT would pay the consultant, to the extent that Alcatel CIT was the
responsible legal entity. Typically when ALCATEL received payment for its
telecommunications services and equipment from its customers (which were often govemments
or agencies or instrumentalities of governments), Alcatel CIT would then pay the consultant who
assisted in securing that business. As such, the payments by Alcatel CIT to the agents retained
by Alcatel Standard occurred over a number of years, and because of the value of many of these
contracts, the payments made to these consultants involved millions of dollars paid out over
many years. To pay this money, among other things, Alcatel CIT maintained a bank account at
ABN Amro Bank in New York, New York, which was used, in part, to pay third-party
consultants located around the world.
36. Often senior executives at Alcatel CIT, Alcatel Standard, and ACR among
others, knew bribes were being paid, or were aware of the high probability that many ofthese
third-party consultants were paying bribes, to foreign officials to obtain or retain business. For
example, in a significant number of instances, the consultant contracts were executed after
ALCATEL had already obtained the customer business, the consultant commissions were
excessive, and lump sum payments were made to the consultants that did not appear to
correspond to anyone contract. In other instances, the same person would establish more than
one consulting company, and Alcatel Standard would retain those multiple compauies (knowing
or purposefully ignoring that they were owned and operated by the same person). This would
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make it appear that the commission rate paid to the consulting company was not excessive, when
in truth and in fact, the aggregate commission rate was exorbitant, thereby enabling the
consultant to make payments to foreign officials.
37. In order to further conceal the illegal nature of these business practices, Aleatel
CIT and ACR employees sometimes employed aliases in their emails to keep secret the names of
foreign officials who were receiving bribes and who were providing ALCA TEL entities with
non-public information.
38. Alcatel CIT, Alcatel Standard, ACR, and certain employees of Alcatel CIT,
Alcatel Standard, and ACR knew, or purposefully ignored, that many of the SARs and FSEs did
not accurately reflect the true nature and purpose of the agreements. Likewise, Alcatel CIT,
Alcatel Standard, ACR, and certain employees of Alcatel CIT, Alcatel Standard, and ACR knew,
or purposefully ignored, that many of the invoices submitted by various third-party consultants
falsely claimed that legitimate work had been completed, while the true purpose of the monies
sought by the invoices was to funnel all or some of the money to foreign officials, directly or
indirectly. Moreover, Alcatel CIT, Alcatel Standard, ACR, and certain employees of Alcatel
CIT, Alcatel Standard, and ACR knew, or purposefully ignored, that the payments in connection
with the SARs, FSEs, and invoices were going to be passed to foreign officials. These
transactions were designed to circumvent ALCATEL's internal controls system and were further
undertaken knowing that they would not be accurately and fairly reflected in Alcatel CIT, Alcatel
Standard, and ACR's books and records, which were included in the consolidated financial
statements that ALCATEL filed with the SEC.
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Conduct in Costa Rica
39. In or around 2001, Valverde and Sapsizian, acting on behalf of ACR and Alcatel
CIT, respectively, negotiated consultancy agreements on behalf of Alcatel CIT with two Costa
Rican consultants, which were intended to make improper payments to Costa Rican government
officials in exchange for telecommunications contracts. The two consultants were Servicios
Notariales, which was headed by Valverde's brother-in-law, and Intelmar. Both consultants had
many personal contacts at ICE.
40. Alcatel Standard, on behalf of Alcatel CIT, executed at least five consulting
agreements with Servicios Notariales, in which Alcatel Standard on behalf of Alcatel CIT,
promised to pay Servicios Notariales a percentage of the value of a specific contract obtained
from ICE. This percentage was as high as 9.75%, a much higher commission rate than
ALCA TEL normally awarded to a legitimate consultant. Executive 1 of Alcatel Standard signed
each of these consulting agreements. In return for the commissions, the agreements required
Servicios Notariales to perform vaguely-described marketing and advisory services. Servicios
Notariales created approximately eleven phony invoices between 2001 and 2003, totaling
approximately $14.5 million, purportedly for commissions related to the contracts awarded to
)\LCA TEL, and submitted those invoices, through Valverde at ACR, to Alcatel CIT.
41. Similarly, Alcatel Standard, on behalf of Alcatel CIT, entered into at least four
consulting agreements with Intelmar to assist ALCATEL in obtaining telecommunications
contracts with ICE. Executive 1 of Alcatel Standard signed each of these consulting agreements.
The agreements required Intelmar to perform vaguely-described advisory services. Intelmar
subsequently created approximately seven invoices reflecting largely inflated commissions
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totaling approximately $3 million between 2001 and 2004, purportedly for commissions related
to tbe contracts awarded to ALCATEL, and submitted tbose invoices to Alcatel CIT.
42. During tbis time period, Sapsizian's supervisor, tbe President of Area 1 (formerly
known as tbe Chlef Operating Officer for Latin America), worked in tbe Miami office, in tbe
Southern District of Florida, and signed tbe Consultant Profile forms for Servicios Notariales and
Intelmar and approved more tban $18 million in payments to tbe consultants despite tbeir huge
amounts. According to Sapsizian, tbe President of Area 1 told hlm on several occasions tbat he
knew he was "risking j ail time" as a result of hls approval of tbese payments, whlch he
understood would, at least in part, ultimately wind up in tbe hands of public officials.
43. Following tbe approval by the President of Area 1, Executive I also approved tbe
retention of and payments to Servicios Notariales and Intelmar despite some obvious indications
tbat tbese "consultants" were performing little or no work yet receiving millions of dollars in
payments reflecting a significant percentage of value oftbe entire transaction. Indeed,
ALCATEL had three consultants assisting on ICE projects at that time. But Executive I turned a
blind eye to thls and otber evidence, whlch made it substantially certain that some part of tbese
payments would be passed on to foreign officials to assist in obtaining or retaining business.
44. ALCATEL, Alcatel CIT, Alcatel Standard, and ACR conducted insufficient due
diligence of Servicios Notariales and Intelmar. N eitber ALCATEL nor any of its subsidiaries
took sufficient steps to ensure tbat the consultants were complying with tbe FCP A or other
relevant anti-corruption laws.
45. In or around November 2000, prior to a formal vote by tbe ICE Board of
Directors, Sapsizian and Valverde offered ICE Official I 1.5% to 2% of the value of a future
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contract to develop a Global System for Mobile ("GSM") technology network in Costa Rica and
to provide 400,000 lines of mobile telephone service (the "400K GSM Contract") in exchange
for ICE Official 1 's assistance in favor of opening a bid round for a GSM-based mobile network,
rather than a network based on a different technology not offered by ALCA TEL (yet that was
offered by ALCATEL's competitors). ICE Official I accepted the offer and subsequently agreed
to share part of this fee with Senior Government Official I. Subsequently, ICE Official 1 used
his influence, and the ICE Board later voted to open a bid round for developing a mobile network
in Costa Rica using the GSM technology that ALCA TEL was offering.
46. On or aboutJune 12, 2001, in part as a result ofICE Official 1 's influence, ICE
awarded Alcatel CIT a separate contract, valued at approximately $44 million, to supply
equipment for ICE's fixed network (the "Fixed Network Contract").
47. On or about August 28,2001, in part as a result ofICE Official 1 's influence,
ICE awarded Alcatel CIT the 400K GSM Contract described above in Paragraph 45. This
contract was valued at approximately $149.5 million.
48. After ALCATEL received the two ICE contracts described above, from in or
around December 2001 to in or around October 2003, Alcatel CIT wire transferred
approximately $14.5 million from its account at ABN Amro Bank in New York to an account at
a correspondent bank, the International Bank of Miami in the Southern District of Florida, to be
further credited to Servicios Notariales' account at Cuscatlan International Bank in Costa Rica.
This amount of money bore no relation to any actual services provided by Servicios Notariales
because it was, in reality, used in large part to make bribe payments to Costa Rican government
officials. Specifically, Servicios Notariales used at least $7 million of that money to pay the
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following Costa Rican government officials for assisting Alcatel CIT in obtaining and retaining
business in Costa Rica, including:
ICE Official 1 $2,560,000 and $100,000 in certificates of deposit
Senior Government Official 1 $950,000 (through the ICE Official 1)
ICE Official 2 $945,000 .;,
ICE Official 3 $145,000
ICE Official 4 $110,000
ICE Official 5 $1,300,000
Legislator 1 $550,000
49. Valverde and Sapsizian each received kickbacks from'Servicios Notariales.
Sapsizian received more than $300,000 from Servicios Notariales, an amount wired to a
Panamanian bank account held by an entity he controlled. Valverde and his family members
received more than $4.7 million in kickbacks from Servicios Notariales.
50. In addition, from in or around 2001 to in or around May 2004, Alcatel CIT wire
transferred from its account at ABN Amro Bank in New York approximately $3.9 million to
Intelmar in Costa Rica. This amount of money bore no relation to actual services provided by
Intelmar and also was used to make bribe payments to Costa Rican government officials. For
example, Intelmar made payments from in or around December 2002 to in or around October
~003 totaling approximately $930,000 to ICE Official 6.
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51. ALCATEL's efforts in Costa Rica were further rewarded on or about May 23,
2002, when ICE awarded Alcatel CIT a third contract, for additional switching equipment for the
fixed network, valued at approximately $109.5 million.
52. Moreover, Sapsizian, on behalf of Alcatel CIT, approved the payment of
approximately $25,000 in travel, hotel, and other expenses incurred by ICE officials during a
primarily pleasure trip to Paris in or around October 2003 to discuss the GSM contract.
Sapsizian instructed an Alcatel CIT employee to pay for some of these expenses in cash to
conceal the payments and avoid leaving a paper trail leading to ALCA TEL. This trip was
partially intended to reward these govermnent officials for providing ALCA TEL with lucrative
contracts, and the expenses were not bona fide promotional expenses under Title 15, United
States Code, Section 78dd-l(c)(2).
53. Through the above-referenced conduct, employees of Alcatel CIT, Alcatel
Standard, and ACR knowingly circumvented ALCATEL's internal controls system and made
inaccurate and false entries in the books and records of Alcatel CIT, Alcatel Standard, and ACR,
whose financial results were included in the consolidated financial statements of ALCATEL
submitted to the SEC. As a result ofthe contracts won by Alcatel CIT in Costa Rica as a result
of bribe payments, ALCATEL earned approximately $23,661,000 in profits.
Conduct in Honduras
54. Besides operating in Costa Rica, ACR provided assistance to Alcatel de
Honduras S.A., a wholly owned subsidiary of ALCATEL which ran operations in Honduras.
Employees of ACR, along with Sapsizian, pursued business opportunities on behalf of
ALCATEL in Honduras with Hondutel and Conate!' Alcatel CIT and Alcatel Mexico pursued
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business in Honduras by retaining certain consultants through Alcatel Standard. Alcatel CIT and
Alcatel Mexico made large commission payments to at least one consultant, knowing that all or
some of the money paid to that consultant would be paid to a close relative of a Honduran
government official, with the high probability that some or all of the money would be passed on
to the Honduran government official, in exchange for favorable treatment of ALCATEL, Alcatel
CIT, and Alcatel Mexico.
55. In or around 2002, at the request of the brother of Senior Government Official 2
in Honduras, Alcatel Standard retained a new consultant in Honduras, Honduran Consultant 1, to
perform vaguely described marketing and advisory services such as "maintaining liaisons with
appropriate government officials." Honduran Consultant 1, however, was, in fact, an exclusive
distributor of "brand name perfumes," and had no contacts in, or prior experience with, the
telecommunications industry in Honduras or anywhere else. Rather, Honduran Consultant 1 was
selected by Senior Government Official 2's brother, who instructed Sapsizian and an ACR
employee to use Honduran Consultant 1 as an agent. Sapsizian and other ACR employees
believed that all or some of the money paid to Honduran Consultant 1 would be paid to Senior
Government Official 2 and the family of Senior Government Official 2 in exchange for favorable
treatment.
56. In retaining Honduran Consultant 1, Alcatel Standard knowingly failed to
conduct appropriate due diligence on Honduran Consultant 1 and did not follow up on numerous,
obvious red flags. First, Honduran Consultant 1 was a perfume distributor with no experience in
telecommunications. Honduran Consultant 1 '8 Company Profile, signed by Honduran
Consultant 1 and ALCATEL's Area President, listed Honduran Consultant 1 's main business as
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the distribution of "fine fragrances and cosmetics in the Honduran market." The Dun &
Bradstreet report provided to the Executive 1 of Alcatel Standard stated that the company was
"engaged in cosmetic sales, house-to-house." Second, the brother of Senior Government Official
2 regularly communicated with ALCA TEL employees via an e-mail address from a domain name
affiliated with Senior Government Official 2 and that official's family. Third, in or around late
2003, Senior Government Official 2' s brother directly contacted Alcatel' s Area 1 President in an
effort to collect sales commissions ALCATEL owed to Honduran Consultant 1. Senior
Government Official 2 then personally met with ALCATEL's Area 1 President in March 2004 in
Spain as part of this effort.
57. Using Alcatel Standard's agreement to retain Honduran Consultant 1 and Alcatel
CIT's and Alcatel Mexico's payments to Honduran Consultant 1, ALCATEL, Alcatel CIT, and
Alcatel Mexico sought to secure an improper advantage in seeking business with Hondutel, and
were able to retain contracts that may have otherwise been rescinded. In fact, Hondutel awarded
ALCATEL one contract in or around 2002: The Pair Gain Project, valued at approximately $1
million. ALCA TEL was awarded four additional contracts in or around 2003, for a combined
contract value of approximately $47 million. These projects were: (1) the National Fiber Optic
project; (2) the Fixed Lines project; (3) the National Radio Network project; and (4) the Hondutel
call center project. Alcatel CIT and Alcatel Mexico were able to retain these contracts in spite of
significant performance problems.
58. Alcatel CIT and ACR employees arranged for several other Honduran
government officials to take primarily pleasure trips to France, which were paid by Alcatel CIT
or ACR directly. From in or around 2002 to in or around 2004, a high-ranking executive of
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Conatel, Conatel Official, provided Alcatel CIT and ACR employees with several sets of
confidential internal Conatel documents, including confidential Hondutel bid documents.
Conatel Official also provided confidential documents to the brother of Senior Government
Official 2 indicating in his email that the documents were "for your eyes only." The brother
forwarded these documents to Alcatel CIT and ACR employees. Alcatel CIT and ACR
employees subsequently arranged for Conatel Official to travel to Europe on three separate
occasions, including one trip that had nothing to do with ALCA TEL business and for which the
official received full reimbursement.
59. A high-ranking executive at Hondutel, Hondutel Official, who was appointed to
his position by Senior Government Official 2, also received gifts and improper payments from
Alcatel CIT and ACR employees. In or around 2004, Hondutel Official solicited and then
received a payment of approximately $2,000 from ACR for an educational trip for his daughter.
Alcatel CIT and ACR employees also arranged and paid for Hondutel Official to take a trip to
Paris, France in or around 2003 with Hondutel Official's spouse. During part of the 2003 trip to
Paris, the Hondutel Official was lobbied to direct business to ALCATEL, but most of the trip
consisted of touring activities via a chauffeur-driven vehicle.
60. Alcatel CIT also made payments to a Hondutel attorney who worked on the Pair
Gain contract. Alcatel CIT paid for a leisure trip to Paris taken by the attorney and the attorney's
daughter in or around June 2003, and then made a payment to the attorney of approximately
$1,500 to thank the attorney for the attorney's work on the Pair Gain contract. The ALCATEL
employee who helped arrange the trip to Paris was informed by an Alcatel CIT employee that it
was "based around the idea of a visit to Paris. Versailles, Mont St. Michel, chauffeur, lido,
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excursion boat, ... , hotel in Paris." The itinerary for June 7, 2003, was listed as "Visit Germany
(?) (unless they want to go shopping in Paris)."
61. In engaging in the above-referenced conduct, employees of Alcatel CIT, Alcatel
Standard, and ACR knowingly circumvented ALCATEL's internal controls system and caused
inaccurate and false entries in the books and records of Alcatel CIT and Alcatel Standard, whose
financial results were included in the consolidated financial statements of ALCA TEL submitted
to the SEC. Alcatel CIT's financial results were included in the consolidated financial
statements of ALCATEL submitted to the SEC. As a result of the bribe payments, ALCA TEL
earned approximately $870,000 in profits.
Conduct in Malaysia
62. ALCATEL also pursued business in Malaysia through Alcatel Malaysia.
Telekom Malaysia was the largest telecommunications company in Malaysia and was controlled
by the government of Malaysia. Telekom Malaysia was Alcatel Malaysia's largest client.
Celcom was Telekom Malaysia's wholly owned subsidiary and focused exclusively on mobile
communications services.
63. In at least 17 instances from in or around 2004 to in or around 2006, Alcatel
Malaysia employees, with the consent and approval of Alcatel Malaysia'S management, such as
Executive 2 and Executive 3, made improper payments to Telekom Malaysia employees in
exchange for nonpublic information relating to ongoing public tenders. The documents
purchased generally consisted of internal assessments by Celcom' s tender committee of non
public competitor pricing information.
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64. Eight of the 17 improper payments to Telekom Malaysia employees were made
in connection with a single public tender that Alcatel Malaysia ultimately won in or around· June
2006: Phase II of a two-part mobile network contract with Celcom, valued at approximately $85
million. For each of these payments, Alcatel Malaysia employees created invoices falsely
referring to various types of "document fees," but on at least one occasion accurately referring to
"purchase of tender documents." Each of these invoices was approved for payment by Alcatel
Malaysia's management, such as Executive 2 and Executive 3, and subsequently paid out of
Alcatel Malaysia'S petty cash account.
65. ALCATEL typically paid its agents and consultants commission rates based on
the total value of a contract rather than pay a fixed fee for services. In late 2005 and early 2006,
. Alcatel Standard, however, entered into consulting agreements with Malaysian Consultant I for
more than $500,000 for marketing reports and studies. At the time payments were made to
Malaysian Consultant I, Alcatel Malaysia and Alcatel Standard were aware of a significant risk
that Malaysian Consultant I would pass on all or a part of these payments to foreign officials.
None of the reports or studies appear to have ever been generated.
66. Similarly, in mid-2005, Alcatel Standard entered into a consulting agreement on
behalf of Alcatel Malaysia with Malaysian Consultant 2 under which Alcatel Standard agreed to
pay a total of$500,000 for a "strategic intelligence report on Celcom's positioning in the cellular
industry in relation to its competitors." Despite paying Malaysian Consultant 2 half a million
dollars for this report, as with Malaysian Consultant I, there is no evidence that Malaysian
Consultant 2 did any actual work for Alcatel Malaysia or ever produced the report. In or around
June 2005, Malaysian Consultant 2 sent Executive I of Alcatel Standard a copy of a thirteen-
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slide PowerPoint presentation, which appears to have been created by Celcom rather than
Malaysian Consultant 2. When making this payment, executives of Alcatel Standard and Alcatel
Malaysia were aware of a significant risk that Malaysian Consultant 2 was serving merely as a
conduit for bribe payments to foreign officials.
67. Malaysia Consultant.l worked for Alcatel Malaysia to benefit ALCATEL before
formal agreements were finalized and executed, under what were called "gentlemen's
agreements," which required that consulting agreements be entered into retroactively.
68. Alcatel Malaysia lacked internal controls, such as formal policies covering
expenditures for gifts, travel, and entertainment for customers, leading to Alcatel Malaysia
employees giving lavish gifts to Telekom Malaysia officials.
69. Through the above-referenced conduct, Alcatel Standard and Alcatel Malaysia
knowingly circumvented ALCA TEL's internal controls system and caused inaccurate and false
entries in the books and records of Alcatel Standard and Alcatel Malaysia, whose financial
results were included in the consolidated financial statements of ALCATEL submitted to the
SEC. Although ALCATEL won the $85 million Celcom contract, ALCATEL did not generate
any profits from it.
Conduct in Taiwan
70. ALCATEL also pursued business in Taiwan through its indirect subsidiary,
Alcatel SEL. Executive 4 of Alcatel SEL hired two third-party consultants, Taiwanese
Consultant 1 and Taiwanese Consultant 2, to assist Alcatel SEL and Taisel, an ALCATEL joint
venture, in obtaining an axle counting contract from the TRA initially valued at approximately
$27 million. Both consultants claimed to have close ties to certain legislators in the Taiwanese
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government who were understood to have influence in awarding the contract due to their
particular responsibilities in the legislature.
71. In or around June 2000, Taiwanese Consultant 1 entered into a consulting
agreement with Alcatel Standard, which approved the agreement despite conducting little due
diligence on the consultant. The Dun & Bradstreet report for Taiwanese Consultant 1, which was
provided to Alcatel Standard in or around 2001 after the consulting agreement was entered,
indicated that attempts to contact Taiwanese Consultant 1 were unsuccessful as the telephone
number, facsimile number, and address provided did not relate to Taiwanese Consultant 1. The
company profile, which was not signed by a Taiwanese Consultant 1 representative and the
ALCATEL Area President until in or around 2002, reflected that Taiwanese Consultant 1 had no
relevant market experience or knowledge, indicating that the company's main line of business
was "Trading for Bar Code Reader, Printer & Ribbon, POS terminal, DATA terminal, CASH
draws."
72. The original Taiwanese Consultant I consulting agreement provided for a 3%
commission; amended agreements signed in or around March 2003 and in or around April 2004
provided that Taiwanese Consultant I would receive 4.75% and 6%, respectively, of the value of
the contract. The agreements provided that Taiwanese Consultant 1 would promote Alcatel
SEL's efforts to secure the TRA axle counting contract, including providing advice and market
intelligence and keeping Alcatel SEL informed of "potential clients' requirements, decisions and
future plans." Executive 1 of Alcatel Standard signed the original agreement and the amended
agreements.
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73. In fact, the purpose behind ALCATEL's hiring of Taiwanese Consultant 1 was so
that Alcatel SEL could make improper payments to three Taiwanese legislators who had
influence in the award of the TRA axle counting contract. On or about May 10,2004, after
Taisel had been awarded the contract, Alcatel SEL paid Taiwanese Consultant 1 a commission of
approximately $921,413 by wire transfer from Alcatel SEL's ABN Amro bank account in New
York, New York. Taiwanese Consultant 1, in turn, made improper payments to two Taiwanese
legislators: Legislator 2 and Legislator 3.
74. Legislator 2 was a member of the Committee of Transport of the Legislative
Council, which had oversight authority for telecommunications contracts in Taiwan. Legislator 2
assisted Alcatel SEL in convincing TRA that Alcatel SEL satisfied the technical requirements of
the tenders. Legislator 2 also publicly supported Alcatel SEL' s bid and provided advice to
ALCATEL concerning its TRA bid documents.
75. Legislator 3 attempted to alter TRA's technical specifications to improve Alcatel
SEL's bidding chances. Taiwanese Consultant 1 promised approximately $180,000 in campitign
funds for Legislator 3' s 2004 election campaign and then paid Legislator 3 approximately
$90,000 in or around 2004, after Alcatel SEL won the bid. Taiwanese Consultant 1 kept some of
the commission and kicked back approximately $150,000 to Executive 4.
76. Executive 4 and Taiwanese Consultant 1 also spent approximately $8,000 on
trips to Germany in or around May 2002 for an assistant in the office of Legislator 2, and in or
around October 2003 for a secretary to the Taiwan Transportation and Communications Minister.
Both trips were primarily for personal, entertainment purposes, with only nominal business
justification. Indeed, the secretary of the Taiwan Transportation and Communications Minister
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brought his ex -wife on the trip, also at ALCATEL' s expense. Alcatel SEL paid for the hotel and
meal expenses directly and reimbursed Executive 4 and Taiwanese Consultant 1 for train tickets,
taxis, and gifts. According to a February 2006 Group Audit Services report, Alcatel SEL's
management knew of and approved reimbursement of these expenses. In addition, in or around
January 2004, Alcatel SEL paid Taiwanese Consultant 1 approximately $3,000 to reimburse it
for a set of crystal given to the secretary of the Taiwan Transportation and Communications
Minister.
77. In or around 2002, Executive 4 hired Taiwanese Consultant 2 on behalf of
Alcatel SEL because Taiwanese Consultant 2's owner was the brother of Legislator 4, who had
influence with respect to TRA matters. Executive 4 met with Taiwanese Consultant 2's owner
and Legislator 4,who requested that Alcatel SEL pay him a 2% success fee through Taiwanese
Consultant 2 in connection with the axle counting contract. To bribe Legislator 4, Alcatel SEL
arranged for a bogus consulting agreement between Taisel and Taiwanese Consultant 2. In
reality, it was never expected that Taiwanese Consultant 2 would provide any legitimate services
to Taisel. On or about April 1, 2004, at Executive 4's instruction, Taisel signed a subcontract
with Taiwanese Consultant 2 that called for Taisel to pay Taiwanese Consultant 2 approximately
$383,895. Taisel paid approximately $36,561 to Taiwanese Consultant 2 on or about May 12,
2004, by wire transfer.
78. Neither Taiwanese Consultant 1 nor Taiwanese Consultant 2 provided legitimate
services to ALCATEL or Alcatel SEL. Their only function was to pass on improper payments to
three Taiwanese legislators on behalf of Alcatel SEL and Taisel. On or about December 30,
2003, Taisel's bid was accepted by the TRA, which granted Taisel a supply contract worth
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approximately $19.2 mfllion, an amount lowered from the originally proposed $27 million
contract as a result of an alteration in the scope of the work required.
79. Alcatel SEL' s financial results were included in the consolidated fmancial
statements of ALCA TEL submitted to the SEC. As a result of the contracts won by ALCATEL
in Taiwan as a result of bribe payments, ALCATEL earned approximately $4,342,600 in profits.
Conduct in Kenya
80 . In or around 1999, the Communications Commission of Kenya invited mobile
. telecommunications operators to pre-qualifY for Kenyan government approval to bid for a license
known as the "2nd GSM" license. Only bidders with a local Kenyan partner owning at least 60%
of the company's equity could apply for pre-qualification. A French telecommunications and
entertainment company ("French Telecom"), which was not an ALCATEL entity, and a Kenyan
company ("Kenyan Company") formed a joint venture ("Kenyan N") to apply for this license.
After a bidding process in which the Kenyan N bid approximately $55 million, the
Communications Commission of Kenya awarded the 2nd GSM license to the Kenyan N on or
about January 28, 2000.
81. After Kenya awarded the Kenyan N the 2nd GSM license, several companies
bid to provide infrastructure and services to the Kenyan N. This frame supply agreement,
valued at approximately $87 million, included construction of a switching center, an operations
and maintenance center, and base stations for the mobile network. After the initial stages of
bidding, the Kenyan N "short-listed" Alcatel CIT and another company to make final bids for
the contract. Two groups within Alcatel CIT handled the bidding -- the Radio Communications
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Division ("RCD") and Area 4, which was the geographic operations area that included France
and Africa.
82. Although the bid was technically made to the Kenyan N, the bidding process
was handled by personnel from French Telecom. French Telecom informed the President of the
Mobile Division that Alcatel CIT would win the bid under one condition: an ALCATEL entity
had to make improper payments to an intermediary In the approximate amount of $20 million.
The President of the Mobile Division and other employees agreed to this condition. In or around
February 2000, French Telecom informed Alcatel CIT that the Kenyan N had selected Alcatel
CIT's bid.
83. In subsequent meetings with Alcatel CIT, personnel from the French
telecommunication company provided further details regarding the improper payments to the
intermediary. French Telecom requested that an ALCATEL entity hire the intermediary and fold
the intermediary's fees into the contract price. French Telecom explained that it wanted the I
intermediary to be hired by an ALCATEL entity as a way to pass money to Kenyan Company. I
French Telecom structured the transaction so that it would cover the costs of hiring the
intermediary by increasing the total price on the contract between Alcatel CIT and the Kenyan
N. The President ofRCD and the President of Area 4 spoke about the French
telecommunication company's request with Executive 1 of Alcatel Standard, who approved the
payments. Alcatel Standard thereafter hired the intermediary, passing the cost through to the
Kenyan N. Alcatel CIT increased the contract price by approximately $20 million to cover the
payments requested by French Telecom. In so doing, this transaction was not accurately and
fairly reflected in ALCATEL's books, records, and accounts.
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84: The contract between AIcatel CIT and the Kenyan N was also accomparuedbya
side agreement signed on or about March 7, 2000, which provided that the Kenyan N would
make a payment to Alcatel CIT if the contract was terminated before certain benchmarks were
reached. The true purpose of the side agreement was to ensure that Alcatel CIT was reimbursed
for any fees paid to the intermediary if the underlying contract was cancelled for any reason. As
such, this transaction was not accurately and fairly reflected in ALCA TEL's books, records, and
accounts.
85. The intermediary met with the Vice-President of Area 4 and Executive I in or
around February 2000. Executive 1 met with the intermediary three additional times. AlcateJ
Standard performed insufficient due diligence on the intermediary and the intermediary's
company ("Company TOO). Executive 1 signed the first contract with Company T on or about
March 17, 2000, which called for a $5 million lump sum payment within thirty days of the
signing of the contract. A company located in Mauritius acted as an agent for Company T and
generated Company 1's invoices. Alcatel Standard executed a separate agreement with the
Mauritius agent, which provided for a $3 million payment to the Mauritius agent. Alcatel
Standard executed four additional contracts for a total value of approximately $4,185,000 with
the Company T, all of which were signed by Executive 1 on or about April 7, 2000. These
aforementioned contracts failed to accurately and fairly reflect the true nature and purpose of the
respective transactions.
86. In or around June 2000, the intermediary met with Executive 1 and the Vice-
President of Area 4 in V elizy, France, and requested that Alcatel CIT enter into another
consulting contract with him. The intermediary suggested that Alcatel Standard enter into the
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contract with another company ("Company Z"). Executive 1 executed an agreement with
Company Z on or about July 11,2000, which provided for a lump sum payment of approximately
$8.3 million to Company Z. According to the back-up documentation compiled for this contract,
the payment was in connection with the "GSM 2nd license project." Again, this back-up
documentation did not fairly and accurately reflect this transaction on ALCA TEL's books and
records. The Dun & Bradstreet report collected by Alcatel CIT indicated that Company Z was an
offshore holding of Kenyan Company.
87. The payments to the Company T were made to Deutsche Bank (Mauritius); the
payment to Mauritius agent was made to Hong Kong & Shanghai Bank Corporation; and the
payment to Company Z was made to the Middle East Bank, Ltd. in Dubai. Each payment was
described in ALCATEL' s accounting system as "commissions on sales." The total amount of the
payments was approximately $20 million. The reason that the payments went to three different
entities, and not just to Company T, was because Alcatel Standard knew that it would have
trouble justifying a $20 million payment to just one consultant if the payments were ever
examined.
88. After entering into the various contracts, the intennediary provided monthly
reports and economic intelligence on the telecommunications market in Africa, but never
provided any information related to the 2nd GSM license or the Kenyan telecommunications
market. In light of the huge amounts of the payments, the fact that the intermediary performed
little legitimate work in connection with the 2nd GSM license, and the fact that Company Z was
an offshore holding of Kenyan Company, there is a high probability that all or a portion of the
approximately $20 million in payments made by Alcatel CIT to the intermediary and the related
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entities was passed on to Kenyan Company, which in tum passed on the funds to Kenyan
government officials who had played a role in awarding the original contract to French Telecom.
Conduct in Nigeria
89. Two ALCATEL entities, ITT Nigeria and Alcatel-Lucent Nigeria (formerly
known as "Alcatel Nigeria Ltd.") operated in Nigeria during the relevant time period. Between
in or around 1999 and in or around 2007, ALCA TEL pursued business with various Nigerian
customers.
90. Certain ALCATEL subsidiaries made improper payments to government officials
in Nigeria in the following contexts: (a) payments made to government officials for the purpose
of reducing tax or other liabilities; (b) payments made to government officials to obtain security
services from the Nigerian police; (c) a payment of approximately $75,000 to a former Nigerian
Ambassador to the United Nations for the purpose of arranging meetings between ALCATEL
representatives and Nigerian Senior Government Official I, a high-ranking official in the
Nigerian executive branch; (d) payments made to government officials for the purpose of
securing recovery of a debt totaling approximately $36.5 million owed by the government of
Nigeria to ITT Nigeria; and (e) a payment to a People's Democratic Party official. These
payments were not described accurately and fairly on ALCA TEL's books and records.
91. ALCATEL personnel also made improper payments via a consultant ("Nigerian
Consultant 1") to a Senior Executive at Nigerian Telecommunications Company 1, a
telecommunications company based in Lagos, Nigeria. ALCATEL also made large improper
payments to two other consultants ("Nigerian Consultant 2" and "Nigerian Consultant 3"), which
were owned at least in part by a relative of the Senior Executive at Nigerian Telecommunications
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Company 1. These payments were not described accurately and fairly on ALCATEL' s books
and records.
92. Specifically, beginning in or around March 2001, ALCATEL sought the
assistance of Nigerian Consultant 1, a Mauritania-based consulting company, to obtain a GSM
license for an affiliate of a Nigerian Telecommunications Company 1. Nigerian Consultant 1
also became involved in obtaining a Second National Operator ("SNO") license for Nigerian
Telecommunications Company 1. Nigerian Consultant 1 was hired primarily because its
principal had significant connections to Nigerian Senior Government Official 2, a high-ranking
official in the Nigerian executive branch. Nigerian Telecommunications Company 1 won the
SNO license in or around August 2002. Although the affiliate of Nigerian Telecommunications
Company 1 won the bid for the GSM license, it did not pay the required fee for the license within
the requisite amount of time and thereby lost the license.
93. ALCATEL also directed Nigerian Consultant 1 to make several commercial bribe
payments totaling approximately €700,000 to the Senior Executive at Nigerian
Telecommunications Company 1 directly and to another company, which was likely owned by
the Senior Executive. These payments were made in order to secure contracts between
ALCATEL subsidiaries and Nigerian Telecommunications Company 1. Alcatel CIT paid
Nigerian Consultant 1 a total of€2,170,000 in consulting fees, all of which were made from
Alcatel CIT's bank account at Societe Generales Paris Opera in France.
94. Alcatel Standard never signed a consulting agreement with Nigerian Consultant 1
related to its assistance with the GSM or SNO licenses. Instead, on or about February 6, 2003,
Alcatel Standard entered into a consulting agreement with Nigerian Consultant 1 to assist Alcatel
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"
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CIT and Alcatel Nigeria in obtaining a certain Purchase Order No.1 with Nigerian
Telecommunications Company 1. According to several witnesses, the consulting agreement was
created to allow ALCATEL to compensate Nigerian Consultant 1 for the "services" it provided
in or around 2001-02 with respect to the GSM and SNO licenses and to make commercial bribe
payments to the Senior Executive in connection with Nigerian Telecommunications Company 1
contracts. Accordingly, the aforementioned consulting agreement failed to accurately and fairly
reflect the true nature and purpose of the transaction.
95. After ending the consulting relationship with Nigerian Consultant 1, Alcatel
Standard hired Nigerian Consultant 2 and Nigerian Consultant 3, both of which were owned at
least in part by a relative of the Senior Executive. These consultants likely were involved in
funneling improper payments to the Senior Executive to secure Nigerian Telecommunication.s
Company I contracts. In total, Alcatel CIT made payments totaling approximately $7,767,644 to
Nigerian Consultant 2 and Nigerian Consultant 3. Four payments totaling approximately
$1,500,000 were paid to Nigerian Consultant 2 through Alcatel CIT's bank account with ABN
Amro in New York. Fifteen payments totaling approximately $6,267,644 were made from
Alcatel CIT's bank account in France to Nigerian Consultant 3's bank account in Switzerland. A
single payment of approximately £32,256 was made from Alcatel Italia's bank account in Italy to
Nigerian Consultant 3's bank account in the United Kingdom. The description of these payments
on ALCA TEL's books and records failed to accurately and fairly reflect the true nature and
purpose of the transaction.
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Conduct in Bangladesh
96. ALCATEL generated a significant portion of its revenue in Bangladesh from
Bangladesh Telegraph and Telephone Board ("BTTB"), the state-controlled telecommunications
services provider. All major telecommunications tenders in Bangladesh required approval from
the Telecommunications Ministry and the Minister of Finance. During the relevant period,
ALCATEL used an agent in Bangladesh ("Bangladesh Consultant"). Alcatel Standard did not
conduct adequate due diligence on Bangladesh Consultant.
97. Alcatel Standard appears to have retained Bangladesh Consultant in connection
with the Bangladesh Singapore Cable Network ("BSCN") project in or around 2000. Bangladesh
Consultant appears to have suggested that ALCA TEL make improper payments to BTTB
officials. Ultimately, BTTB recommended that another company be awarded the project. The
BSCN project was subsequently canceled and instead BTTB chose to participate in the much
larger SEA-ME-WE-4 network, a submarine cable project connecting fourteen countries. This
decision was made in spite ofBSCN's alleged costlbenefit superiority over SEA-ME-WE-4.
98. In or around November 2003, Alcatel Standard retained Bangladesh Consultant
in connection with the SEA-ME-WE-4 project. The SEA-ME-WE-4 project was ultimately
awarded to ALCA TEL and another company; ALCA TEL's portion of the contract was
approximately $258 million. Alcatel Standard executed an agreement in or around October 2004
with Bangladesh Consultant, fixing the agent's compensation at 2% of the value of the contract.
Ultimately, Alcatel CIT paid Bangladesh Consultant approximately $626,492 in compensation
for services provided in connection with the SEA-ME-WE-4 project and, between August 22,
1997, and April 25, 2006, approximately $2,524,939 in connection with various upgrades to a
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predecessor of the SEA-ME-WE-4 project. At the time payments were made to Bangladesh
Consultant, Alcatel Standard was aware of a significant risk that Bangladesh Consultant would
pass on all or a part of these payments to foreign officials.
Conduct in Ecuador
99. ALCATEL conducted business in Ecuador with three major telecommunications
customers, all of which were state-owned: Andinatel, Pacifictel, and Empresa Municipal de
Telecomunicaciones, Agua Potable, Alcantarillados y Saneamiento ("ETAP A"). ALCATEL
operated in Ecuador through Alcatel de Ecuador, a local subsidiary. During the relevant time
period, contracts for equipment sales and major projects were directly executed by Alcatel CIT,
Alcatel Standard, or Alcatel Bell (Antwerp).
100. ALCATEL retained a consultant in Ecuador during the relevant time period
("Ecuadorian Consultant"). Ecuadorian Consultant was a wealthy businessman who had a
longstanding relationship with Executive 1 of Alcatel Standard, who participated directly in
negotiating Ecuadorian Consultant's consulting contracts. Ecuadorian Consultant had an
arrangement whereby he typically received a commission of 10-14% of the value of the sales
contract on all work he performed for ALCA TEL.
101. Because this percentage was much higher than ALCATEL typically paid its
consultants, Executive 1 suggested that ALCATEL enter into consulting agreements with three
or four different Ecuadorian Consultant-controlled entities for each sales contract so that the
percentage would not appear as high. As a result, each of the Ecuadorian Consultant-controlled
entities typically received 3-5% of the sales commission for each project, which allowed
Ecuadorian Consultant to retain his 10-14% commission rate.
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102. The consulting companies that Ecuadorian Consultant controlled all maintained
one or more bank accounts in Miami, Florida, and received at least some payments from
ALCA TEL in those bank accounts.
103. From in or around 1999 to in or around 2004, ALCATEL entities executed at
least fifty-eight consulting agreements with these Ecuadorian Consultant-controlled companies
relating to work purportedly done in connection with government-owned telecommunications
companies in Ecuador. Payments from ALCATEL entities to these Ecuadorian Consultant
controlled companies totaled approximately $8,875,477. Of this amount, approximately
$8,087,477 was paid by Alcatel CIT and approximately $788,000 was paid by Alcatel Standard.
104. The consulting agreements the ALCATEL entities entered into with the
Ecuadorian Consultant entities stated that the consulting firms were to perform such services as
preparing market evaluations, providing client and competition analysis, and assisting in contract
negotiations. In fact, Ecuadorian Consultant and the entities he controlled did little legitimate
work for ALCATEL. Instead, it was anticipated that Ecuadorian Consultant would funnel a
portion of the funds ALCATEL paid him to officials of the Ecuadorian state-owned
telecommunications companies in order to secure business and other benefits for ALCA TEL.
Improper payments were anticipated to be made or offered in connection with at least nine
contracts with government-owned telecommunications companies.
105. ALCATEL also paid for trips taken by officials of the three telecommunications
companies that were principally for pleasure. For example, both the Vice-President and the
Chairman of the Board of Pacific tel received improper all-expenses paid trips to France.
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Conduct in Nicaragua
106. ALCATEL operated in Nicaragua through its subsidiary Alcatel Centroamerica
(fonnerly known as "Alcatel de Costa Rica"). ALCATEL's only customer in Nicaragua was
Empresa Nicaraguense de Telecomunicaciones S.A. ("Enitel"), which was state-owned during
the relevant time period. Ecuadorian Consultant also served as ALCATEL's consultant in
Nicaragua Alcate! Standard entered into consultancy agreements with an Ecuadorian
Consultant-controlled entity for Enitel-related assistance.
107. With the assistance of Ecuadorian Consultant, Alcatel CIT secured two contracts
with Enitel during the relevant time period. The contracts, valued at approximately $1.6 million
and $370,000, were each awarded in or around 2001. Consultancy agreements relating to the two
projects were executed by Alcatel Standard and an Ecuadorian Consultant-controlled entity in
2002. The agreements required the Ecuadorian Consultant-controlled entity to use its best efforts
to promote Alcate! CIT's offers through such measures as "market evaluation," "client analysis
and competition analysis," "bid evaluation and follow-up of tender process and assistance for the
preparation of offers and fmancing facilities," and "assistance in negotiations of contracts with
clients." Each agreement provided for compensation to the Ecuadorian Consultant-controlled
entity in the amount of 8% of the total contract value plus lump sum payments of$100,000 and
$25,000, respectively.
108. Ecuadorian Consultant and the Ecuadorian Consultant-controlled entity appear
to have done little to no legitimate work in connection with these consultancy agreements.
Alcatel CIT made payments totaling approximately $229,382 to the Miami bank account of the
Ecuadorian Consultant-controlled entity in 2002 pursuant to the consultancy agreements.
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Ecuadorian Consultant likely used a portion of these payments to bribe certain key Enitel
officials in order to influence Enitel to award the two contracts to ALCATEL, to obtain
confidential information about competing bids, and to secure favorable financial terms. In
subsequent correspondence with Christian Sapsizian, Ecuadorian Consultant referred to
"commitments" he made at certain meetings to Enitel officials, whom he referred to as "amigos,"
and attributed to them the favorable contract terms granted to ALCATEL. The payments to the
Ecuadorian Consultant-controlled entity were identified in ALCATEL's books and records as
consulting fees, and thus the description of those payments did not accurately and fairly reflect
those transactions.
109. Alcatel CIT also provided a trip to Paris and Madrid to two Enitel officials in late
2001 in order to encourage the execution of one of the two contracts. The purpose of the trip was
largely for pleasure, and it appears that Alcatel CIT covered all travel costs and a large portion of
the expenses.
Other Consultancy Agreements Entered into Without Proper Due Diligence
110. "Angolan Company 1" was a company registered in Mauritius with operations in
Angola. Angolan Company 1 had an affiliated company, "Angolan Company 2," registered in
Angola. In or around 2006, Alcatel Standard signed two consultancy agreements with Angolan
Company 1 and Angolan Company 2 without performing the appropriate due diligence as. part of
an internal controls program. These agreements had stated commission rates of 2%, 8.16%, and
9%, and were valued at approximately €S.3 million, €6.6 million, and €34.9 million,
respectively. The customer on all three projects was an Angolan telecommunications company
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with close ties to "Angolan Senior Government Official," a high-ranking Angolan executive
branch official, and his family. Angolan Company 1 was paid approximately $3.5 million by
Alcatel-Lucent France in or around 2007 pursuant to these agreements. These amounts were
recorded in ALCA TEL's books and records as consulting fees.
Ill. Angolan Company 2 had close ties to both Angolan Senior Government Official
and the Angolan telecommunications company. The sole shareholder of Angolan Company 2
was related to Angolan Senior Government Official. Another close relative of the Angolan
Senior Government Official owned a 40% stake in the Angolan telecommunications company
and was known to act as a front for the Angolan Senior Government Official. As a result,
ALCATEL's payments to Angolan Company 1 were likely intended to influence the private
Angolan telecommunications company, either directly or through Angolan Senior Government
Official's family, to award business to ALCATEL.
112. "Ivory Coast Company" was a company registered in the Ivory Coast with
operations in the Ivory Coast and Burkina Faso. Alcatel Standard, and later Alcatel-Lucent Trade
International, signed sixty-one consultancy agreements with Ivory Coast Company between May
2002 and June 2007 without performing the appropriate due diligence as part of an internal
controls program. The commission rates in these agreements ranged from 1 % to 4% on contract
amounts ranging from €90,000 to €16 million. The customers on these agreements, all of which
were private companies, included two companies in Burkina Faso and six companies in the Ivory
Coast. Ivory Coast Company was paid approximately $3 million by Alcatel CIT (and later
Alcatel-Lucent France) between 2002 and 2007 pursuant to these agreements. These amouli.ts
were recorded in ALCATEL's books and records as consulting fees.
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113. Ivory Coast Company was owned by an Ivory Coast government official. Tills
government official ran Ivory Coast Company's operations from his government office and was a
close advisor to a high-ranking official in the Ivory Coast executive branch. As a result, at the
time payments were made to Ivory Coast Company, Alcatel Standard was aware, or should have
been aware, of a significant risk that Ivory Coast Company would pass on all or a part of these
payments to foreign officials.
114. "Ugandan Company" was a company registered and with operations in Uganda.
Alcatel Standard signed four consultancy agreements with Ugandan Company between March
2004 and June 2006 without performing the appropriate due diligence as part of an internal
controls program even though a state-owned entity was the underlying customer. The stated
commission rate in three of these contracts was 2.5%; the fourth had a commission rate of9.7%.
The value of the underlying contracts ranged from €60,000 to £5.3 million. Ugandan Company
was paid $382,355 by Alcatel CIT (and later Alcatel-Lucent France) between 2005 and 2008
pursuant to these agreements. These amounts were recorded in ALCATEL's books and records
as consulting fees, and thus the description of those payments did not accurately and fairly reflect
those transactions
115. Ugandan Consultant was one of the owners of Ugandan Company . Ugandan
Consultant was a close friend of an advisor to a high-ranking official in the Ugandan executive
branch. Ugandan Consultant was also reputed to be involved in other criminal activities. As a
result, at the time payments were made to Ugandan Company, Alcatel Standard was aware, or
should have been aware, of a significant risk that Ugandan Company would pass on all or a part
ofthese payments to foreign officials.
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116. "Malian Company 1" was a company incorporated in Mali and was owned by
Malian Consultant. During the relevant time period, a relative of Malian Consultant ("Relative
1 ") was married to a high-ranking official in the Malian executive branch. Additionally, another
relative of the Malian Consultant ("Relative 2"), individually and through a company controlled
by him, "Malian Company 2," served as a consultant to Alcatel CIT, including during a time
period in which Relative 2 was a senior executive of the state-controlled cellular telephone
company. During this same time period, Relative 2 was the president and owner of Malian
Company 2 as well as managing director of Malian Company 1.
117. During Relative 2' s tenure as a foreign official, Malian Company 2 consulted for
Alcatel CIT on the execution of a contract with the state-controlled cellular telephone company.
The consulting agreement was executed by Relative 2 on or about April 8, 2000, and by Alcatel
Standard on or about May 2, 2000, and provided for a 12% commission rate on the total contract
value of 45 million French francs (approximately $9,684,407). Alcatel Standard entered into this
consultancy relationship with Malian Consultant without performing the appropriate due
diligence as part of an internal controls program. Alcatel CIT also made additional payments to
Relative 2 for consulting services in Mali. ALCATEL's arrangement with Malian Company 1
entitled Malian Company 1 to a 2% share of any Malian contract for which another consultant
was used. While Relative 2 was a foreign official, he was paid approximately $13,480 on August
15,1999, and approximately $32,897 on February 9,1999, for this arrangement. Relative 2
signed Malian Company l' s exclusive agency agreement in or around April 2000 while he was a
foreign official. As a result, at the time payments were made to Relative 2, Alcatel Standard was
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aware, or should have been aware, that these payments were improper. These amounts were
recorded in ALCATEL's books and records as consulting fees.
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ATTACHMENT B
CERTIFICATE OF CORPORATE RESOLUTIONS
A copy of the executed Certificate of Corporate Resolutions is annexed hereto as
"Attachment B."
Case 1:10-cr-20907-PAS Document 10 Entered on FLSD Docket 02/22/2011 Page 67 of 83
i CERTIFICATE OF EXTRACT OF THE CORPORATE RESOLUTIONS
I OF THE BOARD OF DIRECTORS
i , WHEREAS, Alcatel-Lucent ("Alcatel-Lu~ent" or the "Company") has been engaged in
i discussions with the United States Department oflTustice, Criminal Division, Fraud Section (the
"Department") regarding issues arising in relatioq to allegations concerning certain improper
i payments to foreign officials to facilitate the award of contracts and assist in obtaining business
for the Company; and
WHEREAS, in order to resolve such disctfssions, it is proposed that the Company enter
into a certain agreement with the Department (referred to as the "Deferred Prosecution
Agreement"); and
WHEREAS, the Company's General Counsel together with outside counsel for the
Company, have advised the Board of Directors of the Company of its rights, possible defenses,
the United States Sentencing Guidelines' provisions, and the potential consequences of entering
into such agreement with the Department;
Therefore, during the meeting that was held on July 29, 2010, the Board of Directors has
RESOLVED that:
1. The terms of the agreement in principle with the Department will include, inter
alia, (a) the filing of a two-count Information charging Alcatel-Lucent with violations of the
internal controls and books and records provisions of the Foreign Corrupt Practices Act
("FCPA"), Title 15, United States Code, Sections 78m(b)(2)(A), 78m(b)(2)(B), 78m(b)(5), and
78ff(a); (b) the waiver of indictment on such charges and entering into the Deferred
Prosecution Agreement with the Department; and (c) the acceptance of monetary criminal
penalties against Alcatel-Lucent and certain ofitsidirect and indirect subsidiaries and affiliates,
Case 1:10-cr-20907-PAS Document 10 Entered on FLSD Docket 02/22/2011 Page 68 of 83
totaling $92,000,000, and the acceptance to pay such amount to the United States Treasury, with
respect to the conduct described in the Infonnation;
2. The General Counsel of Alcatel-Lucent is hereby authorized, empowered and
directed, on behalf of the Company, to take all necessary steps to cause the execution of the
Deferred Prosecution Agreement, substantially in accordance with the tenns reviewed by the
Board of Directors at this meeting, with such changes as the General Counsel of Alcatel-Lucent
may approve, upon consultation with and approval by the Chief Executive Officer and the
Chairman of the Board of Alcatel-Lucent;
3. Subject to paragraph 2, the General Counsel of Alcatel-Lucent is hereby
authorized, empowered and directed to take any and all actions as may be necessary or
appropriate and to approve the fonns, tenns or provisions of any agreement or other documents
necessary to carry out and effectuate the purpose and intent of the foregoing resolutions; and
4. All of the actions of the General Counsel of Alcatel-Lucent which actions would
have been authorized by the foregoing resolutions, but occurred prior to the adoption of such
resolutions, are hereby severally ratified, confinned, approved, and adopted as actions on behalf
of the Company.
Date: July 29, 2010
Extract certified confonn to the original Board resolution By Corporate Secretary of Alcatel-Lucent
- 2-
· PHILIPPE McALLISTER Deputy General Counsel
Board Secretary
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ATTACHMENT C
CORPORATECOMPLUNCEPROGRAM
In order to address any deficiencies in its internal controls, policies, and procedures
regarding compliance with the Foreign Corrupt Practices Act ("FCP A"), 15 U.S.C. §§ 78dd-l, et
seq., and other applicable anti-corruption laws, Alcatel-Lucent, S.A., and its subsidiaries
(collectively, "Alcatel-Lucent" or the "company") agree to continue to conduct, in a manner
consistent with all of its obligations under this Agreement, appropriate reviews of its existing
internal controls, policies, and procedures.
Where necessary and appropriate, Alcatel-Lucent agrees to adopt new or to modify
existing internal controls, policies, and procedures in order to ensure that it maintains: (a) a
system of internal accounting controls designed to ensure that Alcatel-Lucent makes and keeps
fair and accurate books, records, and accounts; and (b) a rigorous anti-corruption compliance
code, standards, and procedures designed to detect and deter violations Qf the FCP A and other
applicable anti-corruption laws. At a minimum, this should include, but not be limited to, the
following elements to the extent they are not already part of the company's existing internal
controls, policies, and procedures:
I. Alcatel-Lucent will develop and promulgate a clearly articulated and visible
corporate policy against violations of the FCPA, including its anti-bribery, books and records,
and internal controls provisions, and other applicable foreign law counterparts (collectively, the
"anti-corruption laws"), which policy shall be memorialized in a written compliance code.
2. Alcatel-Lucent will ensure that its senior management provide strong, explicit,
and visible support and commitment to its corporate policy against violations of the anti
corruption laws and its compliance code.
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i
3. Alcatel-Lucent will develop and promulgate compliance standards and
. procedures designed to reduce the prospect of violations of the anti -corruption laws and Alcatel-
r Lucent's compliance code, and Alcatel-Lucent will take appropriate measures to encourage and
: , support the observance of ethics and compliance standards and procedures against foreign
, bribery by personnel at all levels of the company. These anti-corruption standards and
, procedures shall apply to all directors, officers, and employees and, where necessary and
appropriate, outside parties acting on behalf of Alcatel-Lucent in a foreign jurisdiction, including
but not limited to, agents and intermediaries, consultants, representatives, distributors, teaming
partners, contractors and suppliers, consortia, and joint venture partners (collectively, "agents and
business partners"), to the extent that agents and business partners may be employed under
Alcatel-Lucent's corporate policy. Alcatel-Lucent shall notify all employees that compliance
with the standards and procedures is the duty of individuals at all levels of the company. Such
standards and procedures shall include policies governing:
a. gifts;
b. hospitality, entertaimnent, and expenses;
c. customer travel;
d. political contributions;
e. charitable donations and sponsorships;
f. facilitation payments; and
g. solicitation and extortion.
4. Alcatel-Lucent will develop these compliance standards and procedures,
; including internal controls, ethics, and compliance programs on the basis of a risk assessment
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addressing the individual circumstances of the company, in particular the foreign bribery risks
facing the company, including, but not limited to, its geographical organization, interactions with
various types and levels of government officials, industrial sectors of operation, involvement in
joint venture arrangements, importance oflicenses and permits in the company's operations,
degree of governmental oversight and inspection, and volume and importance of goods and
personnel clearing through customs and immigration.
5. Alcatel-Lucent shall review its anti-corruption compliance standards and
procedures, including internal controls, ethics, and compliance programs, no less than annually,
and update them as appropriate, taking into account relevant developments in the field and
evolving international and industry standards, and update and adapt them as necessary to ensure
their continued effectiveness.
6. Alcatel-Lucent will assign responsibility to one or more senior corporate
executives of Alcatel-Lucent for the implementation and oversight of Alcatel-Lucent's anti
corruption policies, standards, and procedures. Such corporate official(s) shall have direct
reporting obligations to independent monitoring bodies, including internal audit, Alcatel
Lucent's Board of Directors, or any appropriate committee of the Board of Directors, and shall
have an adequate level of autonomy from management as well as sufficient resources and
authority to maintain such autonomy.
7. Alcatel-Lucent will ensure that it has a system of financial and accounting
procedures, including a system of internal controls, reasonably designed to ensure the
maintenance of fair and accurate books, records, and accounts to ensure that they cannot be used
for the purpose of foreign bribery or concealing such bribery.
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8. Alcatel-Lucent will implement mechanisms designed to ensure that its anti-
corruption policies, standards, and procedures are effectively communicated to all directors,
officers, employees, and, where appropriate, agents and business partners. These mechanisms
shall include: (a) periodic training for all directors, officers, and employees, and, where
necessary and appropriate, agents and business partners; and (b) annual certifications by all such
directors, officers, and employees, and, where necessary and appropriate, agents, and business
partners, certifying compliance with the training requirements.
9. Alcatel-Lucent will maintain, or where necessary establish, an effective system
for:
a. Providing guidance and advice to directors, officers, employees, and,
where appropriate, agents and business partners, on complying with Alcatel-Lucent's anti
corruption compliance policies, standards, and procedures, including when they need advice on
an urgent basis or in any foreign jurisdiction in which the company operates;
b. Internal and, where possible, confidential reporting by, and protection of,
directors, officers, employees, and, where appropriate, agents and business partners, not willing
to violate professional standards or ethics under instructions or pressure from hierarchical
superiors, as well as for directors, officers, employee, and, where appropriate, agents and
business partners, willing to report breaches of the law or professional standards or ethics
concerning anti-corruption occurring within the company, suspected criminal conduct, and/or
violations ofthe compliance policies, standards, and procedures regarding the. anti-corruption
laws for directors, officers, employees, and, where necessary and appropriate, agents and
business partners; and
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J
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c. Responding to such requests and undertaking appropriate action in
response to such reports.
10. Alcatel-Lucent will institute appropriate disciplinary procedures to address,
among other things, violations of the anti-corruption laws and Alcatel-Lucent's anti-corruption
compliance code, policies, and procedures by Alcatel-Lucent's directors, officers, and
employees. Alcatel-Lucent shall implement procedures to ensure that where misconduct is
discovered, reasonable steps are taken to remedy the harm resulting from such misconduct, and
to ensure that appropriate steps are taken to prevent further similar misconduct, including
assessing the internal controls, ethics, and compliance program and making modifications
necessary to ensure the program is effective.
11. To the extent that the use of agents and business partners is permitted at all by
Alcatel-Lucent, it will institute appropriate due diligence and compliance requirements pertaining
to the retention and oversight of all agents and business partners, including:
a. Properly documented risk-based due diligence pertaining to the hiring and
appropriate and regular oversight of agents and business partners;
b. Informing agents and business partners of Alcatel-Lucent's commitment
to abiding by laws on the prohibitions against foreign bribery; and of Alcatel-Lucent's ethics and
compliance standards and procedures and other measures for preventing and detecting such
bribery; and
c. Seeking a reciprocal commitment from agents and business partners.
12. Where necessary and appropriate, Alcatel-Lucent will include standard
provisions in ag:I:eements, contracts, and renewals thereof with all agents and business partners
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/
that are reasonably calculated to prevent violations of the anti-corruption laws, which may,
depending upon the circumstances, include: (a) anti-corruption representations and undertakings
relating to compliance with the anti-corruption laws; (b) rights to conduct audits of the books and
records of the agent or business partner to ensure compliance with the foregoing; and (c) rights to
terminate an agent or business partner as a result of any breach of anti-corruption laws, and
regulations or representations and undertakings related to such matters.
13. Alcatel-Lucent will conduct periodic review and testing of its anti-corruption
compliance code, standards, and procedures designed to evaluate and improve their effectiveness
in preventing and detecting violations of anti-corruption laws and Alcatel-Lucent's anti
corruption code, standards and procedures, taking into account relevant developments in the field
and evolving international and industry standards.
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ATTACHMENT D
INDEPENDENT CORPORATE MONITOR
1. Alcatel-Lucent, S.A. ("Alcatel-Lucent" or the "Company") agrees to engage an
independent compliance monitor who is a French national (the "Monitor") with demonstrated
expertise in helping companies comply with the Foreign Corrupt Practices Act, 15 U.S.c.
§§78dd-l, et seq. (the "FCPA") and other applicable anti-corruption laws, as set forth in
Paragraphs 1 0-13 of the Deferred Prosecution Agreement. The Monitor will, for a period of
three (3) years from the date of its engagement (the "Term of the Monitorship"), evaluate, in the
manner set forth in Paragraphs 2 through 11 below, the effectiveness of Alcatel-Lucent's internal
controls, record-keeping, and financial reporting policies and procedures as they relate to Alcatel
Lucent's current and ongoing compliance with the books and records, internal accounting
controls, and anti-bribery provisions of the FCPA, the anti-corruption provisions of French law,
and other applicable foreign law counterparts (collectively, the "anti-corruption laws") and take
such reasonable steps as, in its view, may be necessary to fulfill the foregoing mandate (the
"Mandate").
2. Alcatel-Lucent shall cooperate fully with the Monitor and the Monitor shall have
the authority to take such reasonable steps as, in its view, may be necessary to be fully informed
about Alcatel-Lucent's compliance program within the scope ofthe Mandate in accordance with
the principles set forth herein and applicable law, including applicable data protection and labor
laws and regulations, such as, among others, Article I of French Law No. 68-678 of July 26,
1968, as amended by Law No. 80-538 of July 16, 1980 (the "Blocking Statute"). To that end,
Alcatel-Lucent shall: (a) facilitate the Monitor's access to Alcatel-Lucent's documents and other
information and resources, (b) not limit such access, except as provided in this paragraph, and ( c)
Case 1:10-cr-20907-PAS Document 10 Entered on FLSD Docket 02/22/2011 Page 76 of 83
provide guidance on applicable local law (such as relevant data protection and labor laws) to
allow the Monitor to fulfill the Monitor's Mandate. Alcatel-Lucent shall provide the Monitor
with access to all infonnation, documents, records, facilities, and/or employees that fall within
the scope of the Mandate of the Monitor under this Agreement, as reasonably requested by the
Monitor, except as set forth herein.
a. The parties agree that the retention of the Monitor does not establish an
attorney-client, auditor-client, or similar relationship between Alcatel-Lucent and the Monitor
that would otherwise prevent the Monitor from fulfilling its Mandate in accordance with this
Agreement.
b. In the event that Alcatel-Lucent seeks to withhold from the Monitor
access to infonnation, documents, records, facilities, and/or employees of Alcatel-Lucent that
may be subject to a claim of attorney-client privilege, the attorney work-product doctrine, or
similar legal relationships, or where Alcatel-Lucent reasonably believes production would
otherwise be inconsistent with applicable law, Alcatel-Lucent shall work cooperatively with the
Monitor to resolve the matter to the satisfaction of the Monitor. If the matter cannot be resolved,
at the request of the Monitor, Alcatel-Lucent shall promptly provide written notice to the Monitor
and to any French Authority identified by the Department ("the French Authority"). The French
Authority may then transmit such infonnation in accordance with French law to the Department.
Such notice shall include a general description of the nature of the infonnation, documents,
records, facilities, and/or employees that are being withheld, as well as the basis for the claim.
The Department may then consider whether to make a further request for access to such
infonnation, documents, records, facilities and/or employees, to be provided by Alcatel-Lucent to
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the French Authority. To the extent Alcatel-Lucent has provided information to the Department
in the course of the investigation leading to this action pursuant to a non-waiver of privilege
agreement, Alcatel-Lucent and the Monitor may agree to production of such information to the
Monitor pursuant to a similar non-waiver agreement.
c. Except as provided in this paragraph, Alcatel-Lucent shall not withhold
from the Monitor any information, documents, records, facilities, and/or employees on the basis
of an attorney-client privilege, work-product claim, or other similar legal relationship.
3. To carry out the. Mandate, during the Term of the Monitorship the Monitor shall
conduct a yearly review and prepare a yearly report for each of three (3) years, for a total of three
reviews and three reports. With respect to each review, after consultation with Alcatel-Lucent,
the Monitor shall prepare a written work plan_that shall be submitted no fewer than sixty (60)
calendar days prior to commencing each review to Alcatel-Lucent and the French Authority. The
French Authority may then transmit such information in accordance with French law to the
Department. Alcatel-Lucent and the Department shall have no more than thirty (30) calendar
days after receipt of the written work plan to provide comment to the Monitor about the work
plan. The Monitor's work plan for the initial review shall include such steps as are reasonably
necessary to conduct an effective initial review in accordance with the Mandate, including
developing an understanding, to the extent the Monitor deems appropriate, of the facts and
circumstances surrounding any violations that may have occurred before the date on which this
Agreement is accepted by the Court, but in developing such understanding the Monitor is to rely
to the extent possible on available information and documents provided by Alcatel-Lucent. It is
not intended that the Monitor will conduct its own inquiry into those historical events. In
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developing each work plan and in carrying out the reviews pursuant to such plans, the Monitor is
encouraged to coordinate with Alcatel-Lucent personnel, including auditors and compliance
personnel. To the extent the Monitor deems appropriate, it may rely on Alcatel-Lucent
processes, on the results of studies, reviews, audits, and analyses conducted by or on behalf of
Alcatel-Lucent, and on sampling and testing methodologies. The Monitor is not expected to
conduct a comprehensive review of all business lines, all business activities, or all markets. Any
disputes between Alcatel-Lucent and the Monitor with respect to the work plan shall be decided
by the Department in its sole discretion. The Monitor shall send each report to the French
Authority, which may forward such information in accordance with French law to the
Department.
4. The initial review shall commence no later than one hundred twenty (120)
calendar days from the date of the engagement of the Monitor (unless otherwise agreed by
Alcatel-Lucent, the Monitor, and the Department), and the Monitor shall issue a written report
within one hundred twenty (120) calendar days of initiating the initial review, setting forth the
Monitor's assessment and making recommendations reasonably designed to improve the
effectiveness of Alcatel-Lucent's program, policies and procedures for ensuring compliance with
the anti-corruption laws. The Monitor is encouraged to consult with Alcatel-Lucent concerning
its fmdings and recommendations on an ongoing basis, and to consider and reflect Alcatel
Lucent's comments and input to the extent the Monitor deems appropriate. The Monitor need
not in its initial or subsequent reports recite or describe comprehensively Alcatel-Lucent's history
or compliance policies, procedures, and practices, but rather may focus on those areas with
respect to which the Monitor wishes to make recommendations for improvement or which the
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Monitor otherwise concludes merit particular attention, if any. The Monitor shall provide the
report to the Board of Directors of Alcatel-Lucent and contemporaneously transmit copies to the
French Authority. The French Authority may then transmit such information in accordance with
French law to the Department. After consultation with Alcatel-Lucent, the Monitor may extend
the time period for issuance of the report for up to sixty (60) calendar days with prior written
approval of the Department.
5. Within one hundred and twenty (120) calendar days after receiving the Monitor's
report, A1catel-Lucent shall adopt all recommendations in the report unless within sixty (60)
calendar days after receiving the report, A1catel-Lucent notifies the Monitor and the Department
in writing of any recommendations Alcatel-Lucent considers unduly burdensome, inconsistent
with local or other applicable law or regulation, impractical, unduly expensive, or otherwise
inadvisable. It shall not be deemed inconsistent with law if information otherwise protected by
the Blocking Statute may be provided to the Department in accordance with French law via the
French Authority or in some other manner. With respect to any recommendation Alcatel-Lucent
considers unduly burdensome, inconsistent with local or other applicable law or regulation,
impractical, unduly expensive, or otherwise inadvisable, Alcatel-Lucent need not adopt that
recommendation within one hundred and twenty (120) calendar days after receiving the
Monitor's report, but shall propose in writing to the Monitor an alternative policy, procedure, or
system designed to achieve the same objective or purpose. As to any recommendation on which
Alcatel-Lucent and the Monitor do not agree, the parties shall attempt in good faith to reach an
agreement within forty-five (45) calendar days after A1catel-Lucent serves the written notice. In
the event Alcatel-Lucent and the Monitor are unable to agree on an acceptable alternative
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proposal, Alcatel-Lucent shall promptly consult with the Department, which will make a
determination as to whether Alcatel-Lucent should adopt the Monitor's recommendation or an
alternative proposal, and Alcatel-Lucent shall abide by that determination. During the time
period in which a Department determination is pending, Alcatel-Lucent shall not be required to
implement any contested recommendation. With respect to any recommendation the Monitor
determines cannot reasonably be implemented within one hundred and twenty (120) calendar !
days after receiving the report, the Monitor may extend the time period for implementation with
prior written approval of the Department.
6. The Monitor shall undertake two (2) follow-up reviews to carry out the Mandate.
Within one hundred and twenty (120) calendar days of initiating each follow-up review, the
Monitor shall: (a) complete the review; (b) certify whether the compliance program of Alcatel-
Lucent, including its policies and procedures, is reasonably designed and implemented to prevent
and detect violations within Alcatel-Lucent of the anti-corruption laws; and (c) report on the
Monitor's findings in the same fashion as set forth in Paragraph 4 with respect to the initial
review. The second review shall commence one year after the initial review commenced. The
third review shall commence two years after the first review commenced. After consultation
with A1catel-Lucent, the Monitor may extend the time period for these follow-up reviews for up
to sixty (60) calendar days with prior written approval of the Department.
7. In undertaking the assessments and reviews described in Paragraphs 3 through 6,
the Monitor shall formulate conclusions based on, among other things: (a) inspection of relevant
documents, including Alcatel-Lucent's current anti-corruption code, policies and procedures; (b)
on-site observation of selected systems and procedures of A1catel-Lucent at sample sites,
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including internal controls and record-keeping and internal audit procedures; (c) meetings with
and interviews of relevant employees, officers, directors, and other persons at mutually
convenient times and places; and (d) analyses, studies, and testing of Alcatel-Lucent's
compliance program with respect to anti-corruption laws.
8. Should the Monitor, during the course of its engagement, discover that
questionable or corrupt payments or questionable or corrupt transfers of property or interests may
have been offered, promised, paid, or authorized by any entity or person within Alcatel-Lucent,
or any entity or person working directly or indirectly for Alcatel-Lucent, or that related false
books and records may have been maintained relating to Alcatel-Lucent either (a) after the date
on which this Agreement is accepted by the Court or (b) that have not been adequately dealt with
by Alcatel-Lucent (collectively "improper activities"), the Monitor shall promptly report such
improper activities to Alcatel-Lucent's General Counselor Audit Committee for further action.
If the Monitor believes that any improper activity or activities may constitute a significant
violation of law, the Monitor shall also report such improper activity in writing to the
Department. If in the Monitor's judgment such a report to the Department would be inconsistent
with French law, such as the Blocking Statute, or other law, the Monitor shall report such
improper activity in writing to the French Authority, which may then transmit such information
in accordance with French law to the Department. The Monitor shall disclose improper activities
in its discretion directly to the Department or the French Authority, as described above, and not
to the General Counselor Audit Committee, if the Monitor believes that disclosure to the
General Counselor the Audit Committee would be inappropriate under the circumstances. The
Monitor shall address in its reports the appropriateness of Alcatel-Lucent's response to any
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identified improper activities. Further, in the event that Alcatel-Lucent or any entity or person
working directly or indirectly within Alcatel-Lucent refuses to provide information necessary for
the Monitor to perform its duties, if the Monitor believes that such refusal is without just cause
the Monitor shall disclose that fact in writing to the French Authority (with appropriate notice to
the Department). The French Authority may then transmit such information in accordance with
French law to the Department. Alcatel-Lucent shall not take any action to retaliate against the
Monitor for any such disclosures. The Monitor may report to the Department any criminal or
regulatory violations by Alcatel-Lucent or any other entity or person discovered in the course of
performing its duties. If in the Monitor's judgment such a report to the Department would be
inconsistent with French law, such as the Blocking Statute, or other law, the Monitor shall report
such criminal or regulatory violations by Alcatel-Lucent to the French Authority, which may then
transmit such information in accordance with French law to the Department.
9. Alcatel-Lucent shall require the Monitor to enter into an agreement with Alcatel-
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Lucent that provides that for the Term of the Monitorship and for a period of not less than 1 year
thereafter, the Monitor shall not enter into any additional employment, consultant,
attorney-client, auditing or other professional relationship with Alcatel-Lucent, or any
subsidiaries, affiliates, successors, directors, officers, employees, or agents. The agreement also
shall provide that the Monitor will require that any firm with which it is affiliated or of which it
is a member shall not, without prior written consent of the Department, enter into any
employment, consultant, agency, attorney-client, auditing, or other professional relationship with
Alcatel-Lucent or any affiliates, directors, officers, employees, or agents acting in their capacity
as such for the Term of the Monitorship and for a period of not less than 1 year thereafter. To
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ensure the independence of the Monitor, Alcatel-Lucent shall not have the authority to terminate
the Term of the Monitorship without the prior written approval of the Department.
10. At least armually, and more frequently if appropriate, representatives from
Alcatel-Lucent and the Department will meet to discuss the Monitorship and any suggestions,
comments, or improvements Alcatel-Lucent may wish to discuss with or propose to the
Department.
11. Alcatel-Lucent undertakes to use its best efforts to ensure that any information
that might be protected by the Blocking Statute or by other laws that becomes the subject of the
Monitor's reviews or reports is provided to the Department expeditiously in accordance with ,
French law via the French Authority or in some other appropriate marmer.
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